While catching up with old episodes of "Mad Men," I was brought up short by a show-stopping quote from Roger Sterling. Sterling, the senior partner at the Sterling Cooper Agency, tells Creative Director Don Draper that he's been invited to join an arts foundation board. Looking puzzled, Don asks "What does that mean?"

Without skipping a beat, Roger says "Philanthropy is the gateway to power."

Then he elaborated: "There are few people who decide what will happen in our world. You have been invited to join them--pull back the curtain and take your seat."

And so it was. For generations, traditional philanthropy was the exclusive domain of the wealthy and powerful. Many of the great benefactors of the early 20th century made their fortunes from the railroad, steel, and oil industries. These industrial giants sat on boards of nonprofit foundations that they themselves established to oversee how their treasure troves would be dispensed. They determined which causes were worthy. Much of the philanthropic activity was focused on large, sweeping gifts to benefit big institutions like the New York City Public Library, the ballet, universities, and art museums.

How times have changed. Many of today's entrepreneurs are building their businesses based on the idea of fulfilling a new kind of social contract, one in which organizations voluntarily take responsibility for the "triple bottom line": people, planet, and profits. While corporate social responsibility (CSR) is not a new concept, it has new meaning in a Web 2.0 world. For consumers, the Internet and social media deliver a kaleidoscope view of a company's corporate culture. Given this new insight, consumers are exercising their right to patronize companies with values that mirror their own.

Companies today have to address questions that are external to their core business. Does the organization have a moral compass? Does it support worthy causes? Is it a good corporate citizen? Stepping back and taking a fresh look also gives brands a great opportunity to redefine themselves and optimize for the future. It should come as no surprise to corporate America that CSR has become a talent magnet, a sales magnet, and an investor magnet.

How is CSR a talent magnet? Research is revealing the none too startling news that people want to work for caring and ethical employers. According to last year's study by Kelly Services Inc., acting in a socially and environmentally responsible manner is what it takes to gain top talent. Nearly 90 percent of respondents said they are more likely to work for an organization perceived as ethically and socially responsible. A more recent study opened eyes by revealing that one-third of workers would take a pay cut to work for a socially responsible firm.

How is CSR a sales magnet? Globally conscious consumers are changing the rules about consumerism. A 2010 CSR Branding Survey noted that consumers are much more likely to purchase a product with an "added social benefit." We are experiencing a trend in which consumers want companies to meet their needs and simultaneously have a positive impact on society. And why not? Enlightened consumers want their food to be organic, their coffee free trade, their purchases sustainable, and everything to be green. They are even willing to pay a premium for goods from socially responsible companies.

How is CSR an investment magnet? A slew of books and articles have come out recently that articulate the value of socially responsible investing, including the ubiquitous "Socially Responsible Investing for Dummies." The premise is that companies can do well financially by doing good. SKS Microfinance is an example of this concept. A recent New York Times article noted that SKS is aiming to raise $344 million in an initial public offering. This is being closely watched to determine if big profits can be made through the small micro-loans that are changing the lives of thousands of entrepreneurs in the developing world. The early financial results looks good. Socially responsible investment funds largely outperformed their benchmarks in 2009, according to Social Investment Forum data.

The corporate giants of our time are starting to follow in the footsteps of their industrialist predecessors. While yesterday's philanthropists were Getty, Guggenheim, Astor, and Carnegie, today's benefactors are Gates, Buffet, Turner, and Moore. These great leaders are working from a platform of social responsibility, and have started to address some of the most intractable problems of our time such as poverty, global illiteracy, and disease.

The next natural evolution of this trend is the new "social enterprise," a social mission-driven organization that applies market-based strategies to achieve a social purpose. In Andrew Carnegie's 1889 essay "The Gospel of Wealth," he stated that business and the wealthy are the caretakers of our future society. At the time Carnegie's ideas were the exception rather than the rule. Today, many small and large companies are still new to CSR. If the social enterprise enjoys financial success, CSR can become a fundamental principle for businesses rather than an afterthought.

To use a quote from Winston Churchill that even Don Draper would appreciate, "We make a living by what we get. We make a life by what we give."

Ann Charles is CEO of BRANDfog, offering social media and Corporate Social Responsibility strategy for CEOs, and founder of The Great Leaders Conference, celebrating Great Leaders in CSR, Social Advocacy and Sustainability.

When do you know that ESG (or factoring environmental, social, and governance issues into investment and corporate decisions) has gone mainstream? One clue is this week's announcement that MSCI (Morgan Stanley Capital International) is acquiring ESG research conglomerate RiskMetrics (which gobbled up ESG pioneers KLD, Innovest, and Institutional Shareholder Services over the past three years). Another is the agenda of last week's meeting of the Securities and Exchange Commission's Investor Advisory Committee (IAC), which included items such as "ESG Disclosure Work Plan" and "Proxy Voting Transparency." So what does this mean?

The fact that an Investor Advisory Committee even exists – one of SEC Commissioner Mary Schapiro's first initiatives, to return to the "Commission's traditional role as the investor's advocate" (in the words of Committee sponsor, SEC Commissioner Luis Aguilar) – is testament to the success of the G part of the ESG equation: the SEC is governing itself more democratically. The Committee acts as the SEC's sounding board, rebounding guidance to the Commissioners on their regulatory agenda. The Committee's 18 members each represent a different constituency – with the AFL-CIO's Damon Silvers representing labor, and ProxyDemocracy Director Mark Latham representing individual investors, for example.

"Of course, the Commission doesn't have to act on anything the Committee recommends," IAC member Adam Kanzer of Domini Social Investments, who represents the ESG community of social investors, told me in an interview this week. But the very existence of the Committee establishes a mechanism for expressing the public mind – so the Commission would need a damn good reason to act against its recommendations.

The ESG equation squares the circle, reuniting the bifurcation the ol' Investor Responsibility Research Center (which got eaten up by Institutional Shareholder Services in 2005 established with its separate "social and environmental" and "governance" departments (no more having to track down either Meg Voorhes or Carol Bowie, as ESG creates a both/and.) Also, the ESG formulation has turned on its head the traditional perception of sustainability issues as time-wasting, extraneous concerns that drain on returns to potentially material risks and opportunities that investment trustees and corporate directors must factor into decision-making.

Kanzer and Stephen Davis of Yale's Millstein Center for Corporate Governance, chair of the Investor as Owner Subcommittee, outlined the workplan on ESG disclosure (according to meeting attendee Peter DeSimone of the Social Investment Forum, the socially responsible investing industry organization):

• In April, Subcommittee members will hold a meeting on the benefits of ESG disclosure to investors from a risk management perspective;
• In May, they will look at accounting standards and triggers for disclosure of contingent liabilities in the United States and other markets;
• In June, they will review reporting standards, including the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI), and look at information collected by the European Commission during its six meetings on ESG disclosure over the past year;
• In the summer, the Subcommittee plans to hold a public hearing on ESG disclosure to coincide with another meeting of the entire SEC.

The SEC Staff Interpretation released last month – the Commission Guidance Regarding Disclosure Related to Climate Change – set precedent on the E part of ESG disclosure. The guidance does not introduce new rules, but rather clarifies existing rules requiring companies to disclose material risks related to climate change, such as projected impacts of new legislation and international treaties capping carbon emissions.

Predictably, the move prompted opposition: House Financial Services Committee Ranking Member Spencer Bachus (R-AL) fired a letter to Chairman Schapiro voicing "very serious concerns" that the move represents the SEC trying to "promote a political agenda through regulation" and "will impose potentially significant compliance costs on issuers with little apparent benefit to investors." The preponderance of evidence and opinion debunking his concerns (think Stern Report and CDP) raises serious questions whether Bachus is promoting a political agenda through obstruction. Similarly, Senator John Barrasso (R-WY) introduced the Maintaining Agency Direction on Financial Fraud (or MADOFF) bill explicitly to "block" mandatory climate risk disclosure.

Bachus and Barrasso may be spitting into the wind. The corporate community generally understands and even encourages climate change regulation to create certainty and level the playing field through initiatives such as Business for Innovative Climate and Energy Policy (BICEP) and the US Climate Action Partnership (USCAP). Even recently-departed USCAP members BP, ConocoPhillips, and Caterpillar "have reiterated their belief that climate change is a real and serious issue, and that greenhouse gas emissions must be reduced," according to SustainAbility Vice President Jeff Erikson, who pointed to a ConocoPhillips press release re-stating support for federal climate change legislation. "The disagreement instead seems to be in the details of which industries will be most disadvantaged under legislation that USCAP supports," Erikson continued, before voicing disappointment at the three companies' decisions to leave USCAP.

Finally, the Investor Advisory Committee returned to the question of democracy in the wake of the recent Citizens United v. Federal Election Commission case, which considerably expanded corporate political contribution rights. The Investor as Owner Subcommittee voiced its intention to mirror its ESG disclosure proposal by proposing better disclosure or corporate political contribution limits.

The very existence of the Committee expands democratic mechanisms at the SEC, which allows and encourages the submission of public comments to the Committee - twenty five have come in as of this date.  Given the leverage opportunity the IAC represents, maintaining SEC momentum on ESG and corporate democratization may require more of a groundswell to demonstrate widespread public support for these measures – time to "sharpen your pencils."

Bill Baue is Executive Director of Sea Change Media, and Executive Producer/Host of Sea Change Radio, a nationally syndicated show with a global podcast audience. This article was first published on CSRWire.

The old business maxim that “what gets measured, matters” is overused but nonetheless powerful, especially when applied to corporate responsibility:  when information and metrics are combined with disclosure and transparency, corporate posturing on issues that affect society can be quickly replaced with fact-based analysis and discussion.

One current example is Nike Inc.’s newly-published Corporate Responsibility (CR) Report for fiscal years 2007 to 2009. It’s a slickly-produced multimedia display of data and information - in fact, Nike says, an independent panel of stakeholder advisers at one point concluded the volume of information contained in the 176-page written report was so “overwhelming” that it required a rewrite.

“This report is published at a tipping point. It’s time for the world to shift,” Nike CEO Mark Parker writes in the report’s introduction. “We see sustainability, both social and environmental, as a powerful path to innovation, and crucial to our growth strategies.”

That’s a huge change from the 1990’s, when Nike was a poster child for corporate villainy stemming from sweatshop labor practices in Southeast Asia factories.  Since then, the company has charted a very different course in corporate citizenship and, in many important respects, has succeeded.

Grappling with Issues

This latest report places a big focus on environmental sustainability, with Nike sharing its vision of “reaching a closed-loop business model where the goal is to achieve zero waste in the supply chain and have products and materials that can be continuously reused  – no pre- or post-consumer waste.”

What’s most interesting about the report, though, is that you can see Nike grappling, in public, with some tough choices.  The narrative demonstrates what can happen when a company begins reporting regularly and in-depth, and with an apparent commitment to intellectual honesty, about core issues.

For Nike, labor and human rights continue as a top priority and corporate worry.   The company’s three main product lines  — footwear, apparel and equipment — are made in approximately 600 contract factories that employ more than 800,000 workers in 46 countries around the world.  Nearly 60 percent of the work force is in North Asia, 31 percent in South Asia.  One major difficulty is that contract apparel factories generally produce for multiple brands, making it a difficult to maintain standards.

To listen to Nike, monitoring those contract factories for working conditions, wages and overtime – and a host of other issues, including possible unionization – is not easy.  “While we can point to many examples of improvements, challenging issues remain for our company and our industry in systemically identifying and tackling how to affect long-term system-wide change,” the company says.

“In evaluating where our targets fell short, we saw a consistent pattern: a focus on auditing against a set of criteria sometimes results in on-the-ground improvements for workers, but it rarely produces systemic change in the area of concern,” Nike says. “On further reflection, we realized that, if we want to make sustainable improvements for workers, we need to significantly change the way we engage and interact with our supply chain as a whole.”

One potential solution, Nike reports, is collaborating with other brands on factory audits and, maybe more importantly, working with competitors on developing remedies for labor problems as well as standardized codes. And then there are improvements that can be made by Nike alone.  Example: “Asking factories to manufacture too many styles is one of the highest contributors to factory overtime in apparel. We have an opportunity to reduce this pressure by reducing the number of apparel styles and partnering with the factories to improve efficiencies through lean production methods.”

Increased Reporting

There’s more detail in the Nike report than most any layman could digest and understand, and Nike critics – such as Oxfam’s Nike Watch, and a new activist initiative, TeamSweat – are likely to find weaknesses. That’s as it should be.  No one should be satisfied simply because the company has issued a report, even one chock-a-block with narrative, charts and bar graphs.

Some critics of corporate responsibility reports believe they can’t help but be self-serving.  And, in fact, more companies are reporting.  Sixty-six of the S&P 100 firms produced a formal sustainability report with performance data in 2008, a 35 percent jump from the 49 reports produced in 2007, according to a report from the Sustainable Investment Research Analyst Network (SIRAN), a working group of the Social Investment Forum (SIF). However, the SIRAN survey found that only six S&P 100 firms publish complete sustainability reports that meet the highest “A” level reporting standard set by the Global Reporting Initiative.

In the end, it’s difficult to see how more reporting can’t help, as long as it’s done well.  Nike’s latest effort is a good example of how the process can lead to data being gathered, metrics developed and performance benchmarks set.  The process grew out of Nike’s public floggings in the 1990s, says CEO Parker, when “we learned to view transparency as an asset, not a risk.”

About two thirds of socially responsible mutual funds in the U.S. outperformed industry benchmarks during the 2009 economic downturn, according to data compiled by the Social Investment Forum (SIF), a trade association for the funds.

SIF said data on 160 socially responsible mutual funds found that 65 percent of them outperformed their benchmarks last year across nearly all asset classes, including balanced, large cap, small cap and global funds, as well as bonds.  SIF said the performance data it analyzed was provided by an independent third party, Thomson Reuters.

According to the SIF, particular standouts on socially responsible mutual fund performance were 73 large cap funds where nearly three out of four (72.6 percent) outperformed the S&P 500.  On average, large cap funds bested the S&P 500 by more than 6 percentage points.  A majority of the large cap funds offered by SIF members also outperformed the S&P 500 over three years and over 10 years, the association said.

Lisa Woll, CEO of Social Investment Forum, said: “In the wake of the financial crisis more and more consumers are concerned about runaway executive pay practices and other forms of corporate misconduct and sustainability risks.  The SIF’s Mutual Fund Performance Chart allows retail investors to explore which SRI funds incorporate these and other sustainability issues into their investing and proxy voting practices.”

The 22 fund families represented in the SIF analysis are: Access Capital Strategies; AHA; Appleseed; Ariel; Azzad; Calvert; Community Capital Management; Domini; Gabelli; Green Century; Integrity; Legg Mason; Meeder Asset Management; MMA Praxis; Neuberger Berman; New Alternatives; Parnassus; Pax World; Portfolio 21; Sentinel; Walden; and Winslow.