Can big business do good in the world? Can corporations contribute to a healthier planet while still turning a profit? With each new headline about bad corporate behavior, it would be easy to assume that the answer to both questions is decidedly 'no'.

But in fact, a global army is hard at work every day to answer those questions in the affirmative. They are Corporate Idealists: people who believe that business can make the world a better place and are working from within to put their beliefs into action.

Where are these Corporate Idealists? They're in China's industrial zones, working with factory owners to make sure employees are paid and treated properly. They're in Silicon Valley, collaborating with product developers to protect privacy on the internet. They're in Africa, sitting on dirt floors with village elders to make sure that mining is done without disrupting indigenous traditions. They're in executive suites in London and New York, convincing their colleagues that protecting human rights and the environment is good for business.

Why should we care about them? Corporate Idealists are the change agents we must recognize and support if we are to tackle the biggest challenges facing our world today: climate change, food and water shortages, economic disparity. Big business can either solve or exacerbate those problems; Corporate Idealists are working to make it the former, not the latter.

I know that Corporate Idealists exist because I am one of them. I've been a Corporate Idealist since my first Students for Responsible Business (now Net Impact) conference as an MBA student in 1998. I then joined BP and worked in Indonesia and China for three years, consulting with people living near company sites and setting up social programs to make sure that BP's presence didn't harm local communities.

The Deepwater Horizon disaster last year challenged my belief that companies can be good, as I watched the company I supported for so long wreak havoc on communities around the Gulf of Mexico. But while that tragedy tested my faith, it affirmed to me that we need Corporate Idealists now more than ever: My experience with BP in Asia showed me that a company can do good and operate successfully given the right staff and resources -- but that work then needs to replicated throughout a company, and beyond.

Last year more than 5,500 companies around the world issued sustainability reports, up from about 800 ten years ago. An increasing number of companies are working with nongovernmental organizations to assess their socioeconomic impacts (see Oxfam's assessment of Coca-Cola and SABMiller, done in partnership with those companies) and to tackle particular issues, from supporting factory workers to protecting free expression and privacy on the internet.

The real question is this: How do we get the efforts of individual Corporate Idealists to add up to more than the sum of their parts? In other words, how can the work of committed individuals amount to the sweeping changes that we need?

To start, we need to state our shared values. We need a Manifesto for the Corporate Idealist: an outline of the principles and actions that will help us better align the interests of business and society.

Here's my proposed starting point for such a manifesto, based on my ten-plus years working in and with big business and the experience of other Corporate Idealists I've gotten to know over the years:

1. Renounce the carbon offset model. If a company doesn't pay a decent wage and refrain from polluting, it can't redeem itself by sponsoring youth soccer teams or museum exhibits -- or even by creating beautiful, innovative products. (Apple, I'm talking to you.)

2. Learn and improve the tools of business. I didn't need the finance or accounting I learned in business school to speak with those villagers in Indonesia, but I did need those skills to translate their needs into actions for the company. We also need better models of calculating risks, costs, and benefits, that take externalities into account.

3. Listen. Perhaps it's so obvious that a company should listen to its stakeholders that executives assume someone else is doing it. When I started working for BP in China in 2002, local staff were still calling the company by its former name -- British Petroleum -- because "B" in Mandarin can sound like slang for "vagina", and "P" for "fart". Perhaps a trivial (if memorable) example, but if a company fails to heed its own employees' warnings on something as basic as the company name, will it hear concerns about human rights and the environment?

4. Build community. If you're the only one in a company fighting for better practices, it can be a lonely job. Initiatives like the Global Business Initiative on Human Rights bring together Corporate Idealists from different companies to develop tools to support their work and connect with others facing similar challenges.

5. Share stories. Spreadsheets are important, but at the end of the day we're talking about people, not numbers. We have to keep reminding ourselves that every decision we make affects a worldwide supply chain of real human beings.

To be sure, simply following these five steps won't solve the world's problems: Regulators, consumers, and investors need to demand better company behavior. But we need Corporate Idealists and we need to help them succeed. Consider this Manifesto for the Corporate Idealist the beginning of a conversation we must all have, about how to align the needs of business with the needs of society.

Are you a Corporate Idealist? What's your Manifesto? Tell Christine Bader on Twitter: @christinebader.

Christine Bader is a Nonresident Senior Fellow at The Kenan Institute for Ethics, Duke University.  This article was first published on The Huffington Post and is republished with permission.

Watch Christine's TEDx talk, Manifesto for the Corporate Idealist.

Executives responsible for sustainability and corporate social responsibility (CSR) programs at large companies are overwhelmingly optimistic that those initiatives will be part of the “core strategies and operations” of global businesses in the next five years, according to a new survey.

Top sustainability and CSR priorities for those companies in the year ahead, the survey found, were human rights and workers’ rights, climate change, and the availability and quality of water on a global basis.

The survey was based on data from 498 professionals representing more than 300 member companies of BSR, a non-profit global membership and consulting organization that focuses on CSR and sustainability issues; some two-thirds of BSR members are large firms with annual revenue of $1 billion or more.  The results were released in San Francisco at the organization’s annual conference, with about 1,000 participants from more than 30 countries in attendance.

Despite a poor economy, large global businesses “are maintaining, if not extending, their commitments to sustainability,” said BSR President and CEO Aron Cramer.  According to Cramer, corporate managers are concluding that sustainability initiatives help cut costs and save money, particularly in environmental programs; drive “innovation” of new products and business models; and help to “future-proof” overall corporate strategy.

Executives polled in the survey said their biggest current leadership challenge is the integration of sustainability into core business functions.  While more than two-thirds reported that their companies’ communications functions (corporate communications and public affairs) were engaged in CSR/sustainability, far fewer reported engagement by critical operational functions such as investor relations (38%), human resources (37%) and finance (18%).

According to the survey, executives continue to acknowledge that the public does not have a high degree of trust in business, with only 2% sensing “a great deal of trust” from the public. To improve that situation, executives said, the two most important actions their companies should take are to “increase transparency of business practices” (55%) and “measure and demonstrate positive social and environmental impacts” (51%).

Among top subject area priorities, the survey found “a sizeable increase” in interest around water availability and quality over the past 12 months, with 54 percent noting it as a priority, up from 47 percent last year.  Other top priorities were human rights (65%), climate change (63%) and workers’ rights (61%).  BSR’s Mr. Cramer said increased interest in human rights and worker’s rights this year may have been driven by the release in July of the UN’s Guiding Principles on Business and Human Rights.

When asked to "rate your outlook regarding the extent to which global businesses will embrace CSR/sustainability as part of their core strategies and operations in the next five years," 22 percent of the executives said they were "very optimistic" and 62 percent "somewhat optimistic" that would happen.

John Ruggie

The principles grew out of a six-year consultative process which began in 2005, when UN Secretary General Kofi Annan appointed Harvard University Professor John Ruggie as his Special Representative for Business and Human Rights.  While implementation is still in its earliest stages, the Principles have been lauded by non-governmental organizations and endorsed by major corporations. The Coca-Cola Company has praised the “flexible framework” of the Principles; GE has said they will “no doubt serve as a lasting beacon for business entities seeking (to) grow their service and product offerings while respecting human rights.”

John Ruggie recently joined the Corporate Social Responsibility practice of the law firm Foley Hoag as a senior adviser, working with the firm and its clients on issues related to implementation of the Guiding Principles; he continues his association with the Harvard Kennedy School, where he holds a chair in human rights and international affairs, and Harvard Law.  In the following interview with Business Ethics Magazine Editor & Publisher Michael Connor, Ruggie discusses implications of the Principles and why he thinks a newly-coined term – “human rights due diligence”- has already become a permanent entry in the lexicon of international business.

MICHAEL CONNOR: The new Guiding Principles rest on a framework that has what you call three pillars – “protect, respect and remedy.”  Can you explain those?

JOHN RUGGIE: Yes. The first pillar is simply that under the existing international human rights regime, states are required to protect against human rights abuses - not only those committed by state agents, but also by third parties.  So when a country adopts a human rights treaty or convention, there is the requirement that those whose rights are enumerated in those instruments are protected against abuse. By definition, third parties include business. States also have certain legal obligations under customary international law. The bedrock of the Guiding Principles is that they do not attempt to privatize human rights protection: it’s a fundamental duty of states.

Ruggie with UN Secretary-General Kofi Annan in 2004.

The second pillar is what I call the corporate responsibility to respect rights. I chose the word responsibility, rather than duty, because for the most part international law doesn't apply directly to companies.  It applies to states, and through what states do domestically, it applies to companies. The exception to the rule is corporate involvement in the most egregious human rights violations, including crimes against humanity, where domestic courts may apply international standards—as under the U.S. Alien Tort Statute. The corporate responsibility to respect human rights is a social responsibility over and above compliance with applicable laws. It is the minimum expectation society has of business conduct in relation to human rights. It means that as business goes about its business, it should not infringe on the rights of others. So manufacture your mouse traps, deliver whatever services you provide, but don’t infringe on others’ human rights in the process.

The third pillar - access to remedy - includes both judicial remedy, which again is a duty of the state to provide, and non-judicial grievance mechanisms which companies themselves may create to deal with issues before they escalate and turn into major campaigns or lawsuits.  The idea in the latter case is for companies to deal with grievances in an early stage.

MICHAEL CONNOR: What's the business case for concern about human rights?  Why should companies care?

JOHN RUGGIE: If you go to company websites, you won’t find one that says “we don’t respect human rights.”  They will invariably say - if they say anything on the subject, and more and more companies do - that they respect human rights.  I assume they do it in part because it's the right thing to do, and because expectations by external stakeholders have raised the issue on company agendas.  There are also very material reasons.  You’ll recall that way back in the 1990s Nike first got interested because there was a worldwide campaign against the company.  The extractive industry has been hit by lawsuits in courts in Europe and the United States probably more than any other sector. Internet and mobile telephone service providers are under growing legislative and social pressure for revealing user information to authorities and providing them with other tools to track down dissidents. And so on.

"It’s important to keep in mind that the principles are principles.  They're not a toolkit.  You don’t take it off the shelf and plug it in and get an answer."

MICHAEL CONNOR: So there's financial risk?

JOHN RUGGIE: There can be huge financial risks. We're still finishing a research project called the Cost of Conflict with Communities, which was triggered by a Goldman Sachs study about the international oil majors.  Goldman looked at 190 projects and found that the time from first approval to the time the first drop of oil was pumped out of the ground had doubled over the course of the previous decade, creating substantial cost inflation.  They looked into what the factors were and they discovered that it had a lot to do with various permitting issues, with resistance from communities, with demonstrations against projects, with lawsuits.

So we looked into this. One company went back over its own figures. It discovered that in a two-year period it had left $6.5 billion on the table.  Now that attracted attention.  We also did some work in the mining industry.  For a world-class mining operation, which requires about $3-5 billion capital cost to get started, there’s a cost somewhere between $20 million and $30 million a week for operational disruptions by communities.  Another estimate used by the mining industry is that an asset manager is supposed to spend between 5% and 10% of his or her time on community engagement issues.  We found that it can be anywhere from a one-third to 50%, and in some cases 80% of their time.  So there are opportunity costs, financial costs, legal costs and reputational costs.  All this has escalated tremendously, which is why companies themselves have been so interested in the UN mandate I’ve led.

MICHAEL CONNOR: Your report notes that we live in a world of “192 United Nations member states, 80,000 transnational enterprises, 10 times as many subsidiaries and countless millions of national firms, most of which are small and medium sized enterprises.  When it comes to means to implementation therefore, one size does not fit all.”  In that context, how do you go about getting these principles implemented?

JOHN RUGGIE: It’s important to keep in mind that the principles are principles.  They're not a toolkit.  You don’t take it off the shelf and plug it in and get an answer.  Issues of context, issues of industry sector, matter. The size of a company may matter. For example, you don’t want to impose the same sets of rules on a small or medium-sized enterprise that has maybe 100-150 employees and occasionally sources something from overseas that you would apply to a company that has 300,000 employees in all the countries of the world.  So it's a principles-based framework, not a rules-based system, and it certainly isn't a toolkit.  But whatever the granular operationalization that companies develop, it has to meet certain criteria, and that’s what the principles really are intended for.  They're benchmarks against which specific tools that are adopted by companies as a way they implement things can be measured by themselves and other stakeholders.

MICHAEL CONNOR: Are there specific countries or parts of the world that might be more affected by implementation of the principles?

JOHN RUGGIE: One of the things we found is that there's a negative symbiotic relationship between company involvement in human rights abuses and conflict zones -for example, the eastern parts of the Democratic Republic of Congo.  That's one of the types of situation that requires enhanced due diligence.  You're not operating in Denmark; you're operating in a conflict-affected area where the writ of the government is weak to non-existent. There are also sectoral differences: the mining industry and the oil industry, because of their huge physical footprint, have tended to generate community-related issues.  Footwear and apparel and the electronics industry have labor issues.  The IT sector has end-user issues. Pharma has access to essential drug issues. That’s why you can't write a detailed check-the-box toolkit for the globe.  But you can, as I say, provide benchmarks against which such things can be assessed.

"In just three years, the concept 'human rights due diligence' – which didn’t exist before—has entered into a variety of international and domestic policy arenas."

MICHAEL CONNOR: What's been the reaction from business so far?

JOHN RUGGIE: Business has been supportive. I made it a point to reach out to business literally from the beginning, first through the international business associations – the International Chamber of Commerce, International Organization of Employers, the U.S. Council for International Business and the like – and worked closely with them from the start.  And then individual companies started getting involved.  Over the course of the six years, we held 47 international consultations; business was invited to participate, as were other stakeholders.

A number of companies worked with us to pilot various projects. A group of Dutch companies, including Unilever and Shell, piloted the idea of “human rights due diligence” processes, which is one of the key elements in the Guiding Principles.  They spent a year examining whether they could make sense of this concept, and what it would take to make it work.  And then they issued a public report saying “Yes, this actually is a good idea, we can make it work.”

We also got five companies in different countries to pilot site-level grievance mechanisms to see how you make them work.  For example, Tesco set up a pilot in the Western Cape of South Africa for a network of fruit supplier farms.  Sakhalin Energy participated in a pilot in Russia of their natural gas operation on Sakhalin.  We had a Hong Kong-based company collaborating with us in its operations in Vietnam. Cerrejon Coal in Colombia participated. Hewlett-Packard collaborated in China.  So we tried to work with business to make sure that what we were going to propose would have legs by road testing ideas on the ground.

MICHAEL CONNOR: When you talk about human rights, what are the key conflict points?  What violations of human rights most often show up?

JOHN RUGGIE: Again, it varies by industry.  If you look at the extractive and infrastructure sectors, one of the main issues initially has to do with taking over land and resettling the population.  This has to involve adequate consultation and compensation. Particular issues relate to indigenous communities, which have special protections under many national laws and also under international law.  Then there’s issue of the physical security of the person: conflicts between companies and communities; security forces that shoot demonstrators; or, as has been often alleged and sometimes proven, security forces protecting company facilities that trade access for sex, or that rape and sometimes kill people.

In manufacturing, the issue invariably has to do with labor rights.  Do you remember the Foxconn story of last year, when there was a rash of suicides by workers?  Foxconn is a major Chinese supplier of electronic equipment, mobile, telephones, computers and the like, to western brands; those were workplace related grievances.  In the information technology and telecommunications area, a major problem in recent years has been privacy rights. The latter are not always easy cases; they pose dilemmas.  When Google faced the issue in China, they tried to figure it out: “What do we do? Can we move our servers? We don’t want to be complicit in putting dissidents in jail.  At the same time, we're in China and we can't outright violate Chinese law, otherwise we're not going to be here very long.”  One of the things we tried to do in the Guiding Principles is to better inform decision-making in dilemma situations, not to pretend that there are always easy solutions to be had.

MICHAEL CONNOR: The guidelines specifically state that businesses may be involved in adverse human rights activity either through their own activities or as a result of their business relationships with third parties.  Does that put a greater obligation on companies to closely monitor their supply chain relationships?

JOHN RUGGIE: Yes.  That's how this all started in the first place.  To go back to Nike in the 1990s, they didn't own any factories; they were buying from independent contractors.  Nike’s first reaction back then was, “This is not our problem, we're just buying stuff.”  But that argument didn't hold for very long.  So yes, it does put a greater obligation on companies to do adequate due diligence.  Now if you have 100,000 suppliers, as Wal-Mart I think does by now, you obviously can't monitor the day-to-day activities of each and every one of your suppliers.  So it becomes a risk-based approach.  Where are the areas of highest risk?  Companies have enough intelligence sources to know that. They can ask the question: “What are the sectors, what are the geographical areas, where we need to pay most attention?”  That’s part of the due diligence process.

"We now have a foundation on which we can build going forward.  It doesn't solve all the problems.  But at least we now know what the foundations are and how to frame future debate."

MICHAEL CONNOR: Take out your crystal ball for me if you can and look forward 10 years.  How broadly will these principles be embraced by countries and business?

JOHN RUGGIE: Yogi Berra said it was hard to make predictions, especially about the future (laughing). But judging from the reception and uptake so far, I think it's clear that some things are going to move fairly rapidly.  Before 2008, no one had ever used the term “human rights due diligence.”  It was introduced in my 2008 report.  It is now everywhere.

By everywhere, for example, I mean big companies - like GE and the Coca-Cola Company, which have endorsed the Guiding Principles, as have big law firms, like Clifford Chance.  Human rights due diligence is now also in the requirements of the OECD (Organisation for Economic Development and Cooperation) guidelines on multinational enterprises.  What's unique about the OECD guidelines is that they come with a complaints mechanism, so that people who feel that their human rights have been harmed can actually bring a complaint against a company to an office in any the 42 countries that adhere to the OECD guidelines.

The principle has been incorporated into a new ISO (International Standards Organisation) standard, ISO 26000.  The International Finance Corporation has updated the performance standards it requires of clients, which now reference the business responsibility to respect human rights.  The European Commission has incorporated the same principles, including human due diligence, into a new EU strategy on corporate social responsibility. In the U.S., the Dodd-Frank Act includes a due diligence element for companies sourcing certain minerals closely tied to conflict in the Democratic Republic of Congo.

So in just three years, the concept “human rights due diligence” – which didn’t exist before—has entered into a variety of international and domestic policy arenas. It is going to become standard operating procedure going forward.  Companies themselves have welcomed the principle and many are already applying it in practice because adequate due diligence can only be their friend: it provides protection in law suits and other liability issues.  It doesn't absolve companies when they commit wrongs, but if they can demonstrate that they’ve done everything possible to get things right, that can only be helpful.

Another element of the Guiding Principles that has had really good resonance inside the corporate community itself, particularly in the extractive industry, is the idea of site-level grievance mechanisms.  Again, that wasn’t anything that people generally did or talked about three years ago.  I remember being in Peru talking to a community leader; he had just led a community in a demonstration, a long shut-down of a mining operation run by an American mining company. It turned ugly, as these things often do, and people got hurt.  I met with him afterward and asked: “So what brought you to this point? Why did you close down the mine?”  He said something I'll never forget: “They wouldn't listen to us when we came to them with small problems, so we had to create a big one.”

Companies understand that it's better to deal with small problems before they escalate, particularly when they are embedded in a local community, as the extractives are.  I know of a number of companies - I don’t think they’ve announced it publicly, because they don’t want to get too far ahead of the game - that are rolling out site-level grievance mechanisms throughout their operations.

Thirdly, I think the national regulatory regimes in different countries have been as perplexed in the past by business and human rights challenges as business itself was.  But they too are beginning to realize that there are certain preventative measures - like human rights due diligence - which if you write them into policy requirements have tremendous potential positive consequences.  It's always harder to deal with issues after bad things have happened: you end up in the courts, with problems that might have taken place on the other side of the earth, and are costly to resolve.  In the past, we tended to think about effective remedy largely in terms of after the fact judicial remedy. Now the regulatory authorities in various countries are beginning to realize that there are a lot of preventative measures that can and should be used, which lower the incidence of corporate involvement in human rights abuse in the first place, and thereby also lower the burden on the rest of the remedy system.

Finally, judicial remedy will continue to evolve. Judicial reform in countries where the rule of law is weak and governments are corrupt is a slow process, but it is happening. And the web of legal liability for corporate involvement in egregious violations is expanding in the home countries of multinational corporations—a trajectory that will continue no matter how the U.S. Supreme Court rules on the applicability of the Alien Tort Statute to legal persons, such as corporations.

MICHAEL CONNOR: How does it feel, having spent six years on this project, now that it's done?

JOHN RUGGIE: It's not done.  It goes on.  When I wrapped up my mandate in June, I said to the Human Rights Council that this is not the end, but I believe it is the end of the beginning.  What I meant was that we now have a foundation on which we can build going forward.  It doesn't solve all the problems.  But at least we now know what the foundations are and how to frame future debate, which was all over the place in the past.

MICHAEL CONNOR: So is there a feeling of accomplishment about that?

JOHN RUGGIE: Yes.  I mean it hadn't been done before.  And I don’t have to travel as much (laughing).  I get to see my wife and talk to my son more often.

MICHAEL CONNOR: It seems a well-deserved change of pace.  Thanks, John, for speaking with us.

This interview transcript has been edited for length and clarity.

One of my ongoing professional amusements involves what I call “The Name Game” – trying to reach agreement with colleagues on what to call the field in which we work.

Michael Porter

Corporate Social Responsibility (CSR) is the longest-standing and still most commonly used term, certainly on a global basis.  For lots of reasons, I prefer a variant of that: Corporate Responsibility.  Still other colleagues, especially in the U.S., embrace Corporate Citizenship.  Sustainability has gained in popularity in recent years.  And then there’s ESG – representing Environmental, Social and Governance issues.

New terms, and variations of existing terms, emerge with regularity.  Individuals and organizations embrace a particular definition because that definition suits their unique culture and goals.

Most terms, however, have one thing in common.  They hold that business and societal interests are not mutually exclusive; in broad terms, what’s good for society is good for business.  Therefore, business has a vested interest in addressing society’s challenges.

You might call it “shared value” – in fact, that’s exactly the term coined and suggested by Harvard Business School professor Michael Porter and Mark Kramer, co-founder with Porter of the FSG social impact consulting firm.

In the cover story of the current issue of the Harvard Business Review – The Big Idea: Creating Shared Value - Porter and Kramer urge business leaders to recognize that shared value is not "about ‘sharing’ the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value.”

Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.

The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.

Porter and Kramer first addressed the theme of “shared value” in a December 2006 article in the Harvard Business Review, Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility.

In their current article, Porter and Kramaer say there are three distinct ways to create shared value: “by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.”

“The concept of shared value resets the boundaries of capitalism,” they write. “By better connecting companies’ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets.”

Companies employing shared value strategies, according to the authors, include Unilever, Nestlé, Walmart, GE and Johnson & Johnson.

Shared value is a provocative take on what’s happening – and, more importantly, what could happen – when the interests of business and society are aligned.  Porter and Kramer’s article probably won’t resolve the perennial corporate responsibility “Name Game” question, but it is a challenging and valuable analysis, well worth the read.

Photo courtesy of the World Economic Forum.

This article was first published on January 12, 2011.

I have been working in corporate citizenship for two decades, so I have seen the good, the bad the ugly – and learned a lot on the way. Here’s my top ten list of observations to pass on based on McDonald’s own journey thus far:

1. Create a CSR strategic framework
Society was much simpler, from 1955, when McDonald’s was first established, to the late 1980s. We built the “trust bank” by being community leaders, giving back, and having programs that were fun and engaging for our customers.

Then came the late 1980s and 1990s. Society changed and the Internet became a force of nature. McDonald’s was under attack by activists who thought we created too much garbage, hurt the planet, and exemplified the perceived evils of globalization.

By 2000, we learned we couldn’t be reactive anymore. We needed to play offense and get strategic with our CSR efforts. We created several governance bodies and structured processes to help us identify, manage and progress on a variety of social and environmental issues in a strategic manner.

Currently, we have six areas of focus. We are a food business, so nutrition and sustainable supply chain are important. People fuel our business, so people and community are also priorities. Then there is our responsibility to the environment. And at the core of everything we do is a commitment to sound governance and ethics.

2. Sustainability isn’t an initiative
CSR is not a program, initiative or function, but a mindset that is incorporated into every aspect of business planning and operations. At McDonald’s, this comes quite naturally because our values are at the core of everything we do and from the beginning we’ve been committed to doing the right thing. Our founder, Ray Kroc, said, “If we treat our customers right, take care of our franchisees, and always do the right thing—then we will make money and profit.” To me, this statement is equitable to a definition of CSR. If you live and put your values into practice every day, you will end up being a sustainable organization.

3. CSR starts at the top
CSR has to be driven by the top boss and senior management. Otherwise, CSR is peripheral and subject to measures of convenience. Management needs to integrate, allocate the necessary resources, and have it placed in strategic plans. Jim Skinner is our current CEO. He has led a tremendous turnaround over the past seven years. And his leadership on CSR is strong and unwavering. He put CSR right into our business plan. We call it our Plan to Win. Smack dab in the middle it says, “We are going to be a socially responsible company.”

4. Aim for the Smart Zone
It is a real stereotype to think that being socially responsible is a high cost. If you control your own strategies, most CSR efforts bring forth efficiencies, measures that use less resources, or bring a connection or relevance to consumers.

So aim for the Smart Zone. Merely following the law and regulations will merely make you a follower. The sweet spot is staying ahead, but staying smart at the same time.

For example, we have our big suppliers report their environmental performance – the amount of energy, water, and waste produced per pound of product sold to us on an annual basis. We do this so that we can work with them on continuous improvement, but we also initiated this for cost saving reasons. Less energy, water and waste should equals lower cost of production – and we are seeing that in the results.

5. Anticipate and manage emerging issues
No one likes to manage a crisis, so the idea is to stay to ahead of the curve and identify the issue when it is just starting to emerge, in academic studies or from NGO initiatives. This is easier said than done. My experience in business tells me that most business leaders are focused on the here and now or the very near future. However, waiting is a mistake. When you do, you lose control and end up being pushed into a reactive position, and that is never a good thing in business.

6. Manage the open and transparent society
With the power of the Internet, there is now a very radical transparency. People can get information and use this publicly in a matter of seconds. Take this seriously and dedicate resources to providing good and accurate information to as many stakeholders as you can.

7. Manage your planet footprint
We see managing our footprint as a business necessity to ensure we will have the resources we need to be in business well into the future. Good science tells us that we are straining our natural resources. Some estimates say that it will take ten more Earths to supply the needs of the population in just 40 years. We only have one Earth, and we all need to remember that.

8. Get engaged; don’t operate in an island
Smart companies develop a sophisticated stakeholder engagement plan that includes experts, NGOs, customers, media and others who can provide expertise and credibility. At McDonald’s, we’ve worked with a range of outside stakeholders over the years – Environmental Defense Fund, Conservation International, Greenpeace and others – to develop policies and programs that can improve our social, environmental AND business performance.

9. Manage CSR globally
CSR is not the same in every country. What is important to the U.S. is different from Australia, China is different than Brazil. So CSR efforts need to be decentralized in a global enterprise. The values come from the top, but the strategies and tactics will vary in the various geographic operations.

10. Tell your story, but humbly
Lastly, and a lesson we are still learning at McDonald’s, is to tell your story, but do so in a humble way. People want to know two aspects of your business when it comes to telling your story:

The first is obvious: What are you doing? What programs and progress are you making to be a responsible company?

The second is not obvious, and most often ignored by companies. It is all about HOW you are trying to be a responsible and sustainable organization. How are you engaging with society? How are you overcoming barriers and challenges? How are you testing new ideas?

Communicate in equal doses, both the WHAT and the HOW.

Bob Langert is Vice President, Corporate Social Responsibility for McDonald's. His responsibilities with McDonald’s include social responsibility efforts, including McDonald’s social responsibility reporting; global environmental management systems and issues; global supply chain issues (e.g., sustainable agriculture, biotechnology, animal agricultural and animal welfare programs); issues management; and part of McDonald’s “Balanced, Active Lifestyles” team.

This article was first published on the web site of the Boston College Center for Corporate Citizenship.

John Ruggie, Special Representative of the UN Secretary-General for Human Rights, in Geneva, Switzerland. March 2007.

The United Nations Human Rights Council today endorsed the Guiding Principles on Business and Human Rights proposed by UN Special Representative John Ruggie.  The principles provide guidance for implementing the UN “Protect, Respect, Remedy Framework,” which rests on three pillars:

1. The state duty to protect against human rights abuses from third parties, including business, through policies, regulation, and adjudication;

2. The corporate responsibility to respect human rights, implementing due diligence to avoid infringement and address adverse impacts;

3. Access to effective remedy for victims of human rights abuses.

The council’s vote marks more than the end of Ruggie’s successful mandate. It also signals the beginning of a new chapter in the struggle to address and eliminate human rights abuses involving business. Going forward, with a new UN working group building capacity for and driving implementation of the Guiding Principles, companies will implement the human rights due diligence called for in the Guiding Principles; governments will strengthen their policies and regulations in this area; and investors and non-governmental organizations (NGOs) will align their expectations and advocacy around the principles’ standard for corporate responsibility.

Today, most CSR executives (and corporate lawyers) are likely wondering, “What does this mean for my company?”

From Unproductive Dialogue to Global Consensus

Before addressing the implications for business, it is worth examining what it took to get us here. Ruggie achieved what seemed unthinkable in 2005 at the beginning of his mandate. Back then, facing intense business opposition and strong NGO support, the UN Human Rights Commission declined to act on the so-called Draft Norms, which would have assigned to business the same human rights duties as governments (albeit a subset of rights deemed business-relevant). In essence, the business and human rights dialogue was unproductive and lacked even a common definition of the problem.

Today, the debate is driven by clear definitions and a global consensus, despite many new and arguably more complex human rights and business challenges. The consensus among governments, businesses, civil society organizations, and investors, is particularly remarkable. Organizations as varied as the International Trade Union Confederation, the International Chamber of Commerce, NGOs like EarthRights International, companies like Coca-Cola and Total, the Chinese government representative at the UN Human Rights Council, and investors representing more than US$2.7 trillion in assets have all generally voiced their support for the Guiding Principles. Granted, some advocacy groups, including Human Rights Watch and Amnesty International, have voiced important criticism, suggesting that the principles’ standards for government and business are too low. But even these organizations likely will invoke the Guiding Principles in their efforts with business, while advocating at the UN level for more stringent standards.

‘Principled Pragmatism’ and Broad Stakeholder Engagement

Ruggie achieved this level of consensus in large part by relying on two important approaches: “principled pragmatism” and broad, inclusive stakeholder engagement. His mandate and the resulting standards did not compromise on fundamental human rights principles, and it was nonetheless pragmatic about what is achievable today. Crucially, the standards did not let perfect become the enemy of good. In this vein, Ruggie notes that while the Guiding Principles will not end business and human rights challenges by themselves, they will provide “a common global platform for action, on which cumulative progress can be built, step-by-step, without foreclosing any other promising longer-term developments.”

Ruggie’s emphasis on broad and inclusive stakeholder engagement was equally important in achieving the widespread support for the principles. He conducted 47 international consultations with governments, businesses, civil society representatives, and investors. Some engagements were open, others were behind closed doors, and all were supported by an online consultation that solicited input from a wider range of stakeholders.

Ruggie’s success underscores the importance of global and inclusive stakeholder engagement, which, combined with the team’s “principled pragmatism” will surely also guide the new UN working group’s efforts to implement the principles.

‘Know and Show’ Respect for Human Rights

So what does this mean for business? The principles are neither legally binding, nor do they establish new responsibilities for business. Rather, they clearly articulate society’s current, simple expectation: Companies have a responsibility to respect human rights. That means:

• Adopting a human rights policy commitment
• Ensuring non-infringement through human rights due diligence
• Addressing any adverse human rights impacts the company was involved in
• Measuring and reporting on performance.

In short, the principles call on companies to “know and show” that they respect human rights.

Even though the principles are simply a clearer articulation of existing societal expectations, the development of effective human rights management systems will feel new to many companies. There are about 80,000 multinational companies today, and, according to the Business and Human Rights Resource Center’s list, only 271 companies have human rights policies. That number is likely to rise significantly.

While the principles provide companies with more detailed guidance on human rights policies, due diligence, and operational-level grievance mechanisms, they are not intended to be an off-the-shelf tool. Ruggie’s mandate encompassed all business enterprises, and so, in theory, the Guiding Principles apply to a multinational company like GE as much as they do to the dry cleaner down the street. They are intentionally high level and allow for customization in some areas based on the company’s size, resources, and human rights risks.

In addition to guiding the way companies implement human rights management systems, the principles will also affect companies’ relations with government and civil society. While the principles are not legally binding, the UN endorsement of and broad consensus on the principles will likely lead to an alignment of public policy and stakeholder expectations for companies around the human rights management steps outlined in the principles.

Already, governments such as Australia, Canada, the EU, and the UK have applied the UN Protect, Respect, Remedy Framework in their public policy. We can expect governments to begin implementing the principles’ many recommendations directed at them, including, for example, encouraging or requiring corporate human rights disclosure.

In addition, investors and advocacy organizations will be more consistent in their demands for companies to demonstrate and ensure respect for human rights through the measures outlined in the principles. As mentioned above, a group of 29 investors, including asset managers such as F&C and the major pension funds, PGGM and USS, have endorsed the principles, and their human rights research and shareholder advocacy will no doubt be guided by them.

Ultimately, pressure on companies to act will increase and be more consistent, which will lead to more companies establishing the necessary management systems. Many companies have already or are about to begin this process. Johnson & Johnson recently adopted a human rights policy that aligns with the expectations articulated in the principles and the UN Protect, Respect, Remedy Framework. Goldcorp commissioned a human rights impact assessment referencing the framework. And Citigroup commits in its latest citizenship report to engage with stakeholders and peers to explore how banks can implement the framework and principles. With the UN’s endorsement of the principles, more companies will follow suit.

Faris Natour leads BSR’s human rights practice, advising companies on human rights strategy, policy development, human rights impact assessments, and other elements of human rights due diligence.

For all the significant achievements companies are making as corporate citizens, the issue of their real impact on society - and what as a result society may actually need back from them - raises the question of whether we are adequately defining what is expected by being socially responsible.

A McDonald's Happy Meal

The issue of marketing to children really brings that into focus; with food marketing a timely lens, the issue of obesity a hot health care crisis, and McDonald’s handling of responsibility, as one of the world’s largest fast food chains, a case in point.

As background, McDonald’s Happy Meals for children with toys has come under attack. San Francisco is one of the cities that has voted to ban selling toys with fast food for children that exceed certain levels of salt, fat, calories and sugar.  McDonald’s was accused of deceptive marketing practices to children over the lure of toys as an inducement to buy Happy Meals. Healthy alternatives are available, apple slices in place of fries and milk instead of soda – if kids are willing to eat them. But, there is still the issue of high sodium content in burgers.

At McDonald’s May 17, 2011 shareholder meeting, activists focused attention on McDonald’s marketing to children. In February 2011, in anticipation of McDonald’s shareholder meeting, Corporate Accountability International launched a campaign to fire Ronald McDonald, the clown mascot for the last nearly 50 years, and encourage headquarters to stop marketing to children by delivering petitions to individual restaurants. They also asked the chain to address directly the relationship of fast food to obesity. Beginning the campaign in a Portland, Oregon suburb, by May they had gathered 20,000 parents’ and community residents’ signatures on petitions which they delivered to the shareholder meeting.

In Oregon, McDonald’s threw down the gauntlet, and affirmed Ronald’s job security, saying he is “the heart and soul of Ronald McDonald House Charities, which lends a helping hand to families in their time of need.” The response demonstrated how McDonald’s infuses the emotional and the marketing: Ronald, the symbol to families dealing with sick and dying children, is also the brand, signifying the food and fun atmosphere to eat it in.

A letter signed by 600 health professionals and organizations, critical of the link between fast food and obesity, was read at the shareholder meeting. It had run as full page ads in newspapers across the country. In addition, shareholder Proposal 11, by the Sisters of St. Francis of Philadelphia, requested McDonald’s undertake a report on its “policy responses to public concerns about the linkage of fast food to childhood obesity, diet related diseases and other impacts on children’s health.” The proposal was soundly defeated.

In his remarks at the meeting, CEO Jim Skinner asserted the company’s right to advertise freely, to offer its menu and lifestyle selections, and leave to parent’s the right to chose what their children eat, saying it is up to personal responsibility. McDonald’s Corporate Social Responsibility (CSR) information indicates the company serves “a balanced array of quality food products and provides the information to make individual choices.”

Marketing to children, whether the subject is food, toys, clothes or anything else raises enormous concerns for Susan Linn, director and co-founder of a national coalition of health care professionals, educators, parents and others called the Campaign for a Commercial-Free Childhood.

“There is no ethical, moral, social, or spiritual justification for targeting children in advertising and marketing, said Linn recently at a Conscious Capitalism Conference. Linn, who also teaches psychiatry at Harvard Medical School, cited obesity and a number of other issues impacting children and society that stem from targeting kids, including youth violence, sexualization, underage drinking and smoking, excessive materialism and the erosion of creativity.

“Kids are inundated with advertising in a way never before, she said in an interview. “I don’t believe in any advertising to children.”

The food industry has been effective in limiting the Federal Trade Commission’s ability to regulate marketing to children, and unless Congress changes the rules, companies self-regulate. I asked Linn what protection the Children’s Food and Beverage Initiative provides. Linn indicated it didn’t provide any because it has no actual authority and the standards are voluntary.

The Coalition advocates that children be able to develop a healthy relationship to food, but McDonald’s, Linn says, entices kids not because of the food but because of the toys and the message of happiness that is part of their advertising.

Marketing to children is inherently deceptive because kids take things literally and media characters play a big role in their lives, Linn says. They don’t understand persuasive intent until they are eight years old; and the brain’s capacity for judgment isn’t developed until their 20s which makes them very vulnerable as marketing targets.

Of course parents are accountable for educating their children about responsible choices and healthy foods. And, they have the choice not to take their kids to McDonald’s. Except...if you serve more than 64 million people in 117 countries each day and many of your restaurants are open 24/7, the chain has created a compelling draw.

Add to that, a recent report by Yale University’s Rudd Center for Food Policy and Obesity that more fast food marketing dollars for toys are being spent (to get kids in the door) while marketing efforts to promote healthy meals haven’t really increased.

I asked Cheryl Kiser, the former managing director of Boston College’s Center for Corporate Citizenship for her take on marketing to kids. “CSR has had an enormous influence helping companies reduce their global footprint by addressing human rights and other issues,” said Kiser, now the managing director of Babson College’s Lewis Institute. But “companies are socializing kids and the imprint on those kids is not necessarily creating common good outcomes.”

“Having a young over-sexualized population of kids who have no awareness of the implications or consequences of their choices is unhealthy," she adds. “Foods appealing to kids because they are tasty, high fat and zero nutrition is also unhealthy.  When we start to imprint early in behaviors and consumer choices things that don’t lead to personal and common good, and that need to be corrected in teen years by good CSR programs, is CSR doing its job?"

Photo by franzconde via Flickr

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics.

It is generally held that corporate social responsibility (CSR) could increase company profits and thus most large companies are actively engaged in it. But few executives and managers are aware of the research on this important subject. And as I review here, the research does show that it may improve profits. However, linking profit growth to abstract variables that are frequently difficult to define is a challenging task.

Most executives believe that CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiencies as well. An added advantage for public companies is that aggressive CSR activities may help them gain a possible listing in the FTSE4Good or Dow Jones Sustainability Indexes, or other similar indices. This may enhance the company’s stock price, making executives’ stock and stock options more profitable and shareholders happier.

Substantiating some of these beliefs is a study, Corporate citizenship: Profiting from a sustainable business, by the Economist Intelligence Unit (EIU) published in November 2008. Corporate citizenship is another term roughly equivalent to CSR.

The EIU study said that, “corporate citizenship [CC] is becoming increasingly important for the long-term health of companies even though most struggle to show a return on their investment from socially responsible activities… 74 per cent of respondents to the survey say corporate citizenship can help increase profits at their company… Survey respondents who say effective corporate citizenship can help to improve the bottom line are also more likely to say their strategy is ‘very important’ to their business (33 per cent) compared with other survey respondents (8 per cent).”

At the heart of the debate as to whether CSR improves profits is first how you define it. Besides the terms CSR and CC, another frequently used and related term is corporate social performance (CSP). In the above quoted EIU study, it provides the following definition of CC: “corporate citizenship is defined as transcending philanthropy and compliance, and is addressing how companies manage their social and environmental impacts as well as their economic contribution. Corporate citizens are accountable not just to shareholders, but also to stakeholders such as employees, consumers, suppliers, local communities and society at large.”

The study of CSR and its relation to corporate profits is growing. The most recent study on this subject is by Cristiana Manescu. In her thesis, "Economic Implications of Corporate Social Responsibility and Responsible Investments,” at the University of Gothenburg's School of Business, Economics and Law, Sweden, she wrote on December 6, 2010 that, “the results [of her thesis] reveal that CSR activities do not generally have a negative effect on profitability, but that in the few cases where they have a positive effect, this effect is rather small.” Other studies add further perspectives.

Defining the experience of CSR in relation to different industries is this study, "The Economics and Politics of Corporate Social Performance" by David P. Baron, Maretno A. Harjoto, and Hoje Jo, published on April 21, 2009. The researchers found that, “For consumer industries, greater CSP [corporate social performance] is associated with better CFP [corporate financial performance], and the opposite is true for industrial industries… Empirical studies have examined the relation between CSR and corporate financial performance, and while the results are mixed, overall the research has found a positive but weak correlation.”

However, reviewing individual empirical studies can be confusing. But by using the technique of ‘meta-analysis,’ many studies can be statistically analysed to determine collective results. A meta-analysis on CSR and its link to profits won the famed socially responsible investing, Moskowitz Prize in 2004. The study, "Corporate Social and Financial Performance: A Meta-Analysis," was compiled by researchers Marc Orlitzky, Frank L. Schmidt and Sara L. Rynes. It yielded encouraging data suggesting a positive link between CSR and increased profits.

Summing up their results, the researchers said, “we conduct[ed] a meta-analysis of 52 studies (which represent the population of prior quantitative inquiry) yielding a total sample size of 33,878 observations. The meta-analytic findings suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility, is likely to pay off… CSP [corporate social performance] appears to be more highly correlated with accounting-based measures of CFP [corporate financial performance] than with market-based indicators, and CSP reputation indices are more highly correlated with CFP than are other indicators of CSP. This meta-analysis establishes a greater degree of certainty with respect to the CSP-CFP relationship than is currently assumed to exist by many business scholars.”

So the research generally indicates that CSR/CC/CSP, no matter how you define it, does offer potential benefit to corporate profits. But there is another unanswered problem, and that relates to causation.

Do high profits enable greater spending on CSR, or is it that CSR itself creates higher profits? Referring again to the study, "The Economics and Politics of Corporate Social Performance," the researchers write that, “…the direction of causation remains an open question. That is, good CSP could cause good CFP, but good CFP could provide slack resources to spend on CSP. As the Economist wrote, ‘...whether profitable companies feel rich enough to splash out on CSR, or CSR [activity itself] brings profits.’” Hopefully, future research will be able to answer this question.

On balance, surveys and the research literature suggest that what most executives believe intuitively, that CSR can improve profits, is possible. And almost no large public company today would want to be seen unengaged in CSR. That is clear admission of how important CSR might be to their bottom line, no matter how difficult it may be to define CSR and link it to profits.

Ron Robins is Founder and Analyst at the website Investing for the Soul and a financial and economics columnist for alrroya.com, a leading Middle Eastern business portal/publication.

This article is reprinted with permission.  Copyright alrroya.com.

It's impossible to discuss the role of Corporate Social Responsibility (CSR) in today's business without acknowledging the elephant in the room. The economic collapse that began in 2007 was largely the result of a colossal failure of leadership in both the finance industry and the U.S. government. The once venerable investment banking industry has devolved into an unsupervised and unregulated market, a giant that casts its dark shadow over the entire economic system. And while most of us are still wading through the debris of the Great Recession, Congress has yet to enact any truly game changing regulation, and Wall Street compensation still incongruously exceeds the pay of today's brain surgeons.

For a comprehensive history of how we got here, watch the film Inside Job, but here is the abbreviated version: The banking community created complex high risk financial instruments whose singular purpose was to drive maximum short term profits. The government did nothing to protect us, except to determine that tax payers must bailout these companies that were considered too big to fail. The credit crisis, the housing market collapse, illegal foreclosures and long term unemployment ensued, while the banks continue to thrive, rewarding themselves with lavish pay and bonuses.

So where did this dichotomy come from? How did it happen that the goals of investment banks are in direct conflict with the health and well-being of the entire economic system? And how can we reconcile the profound gains achieved on Wall Street with what Umair Haque calls America's "jobpocalypse"?

Mr. Haque makes the point in The Capitalist's Paradox that what's standing in the way of great capitalism today might just be yesterday's capitalists--"trying at every turn to stifle competition, squelch information, earn an unfair advantage, and extract value from people, nature, and the future, instead of creating authentic, thick, shared value for them."

I cannot disagree. But I would also add that for those of us who work in the world of CSR, it seems unfathomable that an industry as powerful as Wall Street would continue to operate in such a self-serving and destructive manner. Every day, we see examples big and small of how a new culture of business leadership is emerging, one in which corporations resolve to instill positive values and evaluate the long term effects of every decision they make. CSR broadens the definition for business success, raising the bar to include the Triple Bottom Line: People, Planet and Profits.

In order to successfully integrate CSR into business, we have to start by changing the culture of Wall Street, and that change has to come from within. There are some bright spots in the leadership of the financial sector, these are key individuals who are mindful of the impact that their business has on the world around them. By showcasing these game-changers in our conferences and including them in our conversations, we can shine a light on those working tirelessly to change the rules of the game. Bill Ackman is a good example. Mr. Ackman is the billionaire founder of hedge fund Pershing Square Capital, and a very outspoken critic of the conflict of interest at the ratings agencies. Mr. Ackman continues to call out the corruption in the ratings process and offers solutions to fix the very unhealthy dynamic between the rating agencies and the investment banks. Mr. Ackman is also a philanthropist; his Pershing Square Foundation provides grants to entrepreneurs who facilitate change in education, global health care, poverty alleviation, and human rights.

There are other values-based finance leaders who are working to build transparency into the investment banking business. David Blood, of Generation Investments, is a pioneer working to transform the culture of the financial industry for the better. Mr. Blood is a proponent of Sustainable Capitalism, a movement which seeks to maximize long-term value creation, by integrating environmental, social and governance (ESG) factors into investment strategies. Likewise, Jacques-Philippe PivergerGlobal Syndicate of Pinebridge Investments is an inspirational leader and a serial social entrepreneur, doing selfless work for the and the Haiti Project. On the business side, there is Curtis Ravenel, Global Head of Sustainability at Bloomberg. Curtis is a pioneer in ESG investing who is leading Bloomberg's push for corporate sustainability and responsible investing.

Wall Street has always claimed to attract "the best and the brightest" young talent to their industry. If true, then this is very good news, because many of today's brightest graduates are expressing an interest in careers that create social and environmental value, along with financial profitability. Just two years ago, nearly 20% of the Harvard graduating class signed "The M.B.A. Oath," a pledge that M.B.A.'s will act ethically, and refrain from advancing their "own narrow ambitions" at the expense of others. Perhaps the young graduates themselves will transform Wall Street by rejecting a scorched earth investment strategy, in favor of one that has a foundation in social responsibility. Let's hope that this movement becomes a beacon that is bright enough even for Wall Street to see.

Ann Charles is CEO of BRANDfog, offering social media and Corporate Social Responsibility strategy for CEOs.