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Pioneering Corporate Social Responsibility

Applying a socially conscious lens to your business can boost morale, reputation and, yes, profitability.

As appeared in Wealth magazine

Pioneering Corporate Social Responsibility

Applying a socially conscious lens to your business can boost morale, reputation and, yes, profitability.

“Doing well by doing good” isn’t exactly a new concept for businesses, but cultivating a socially responsible company mindset and succeeding financially can seem like a risky, and overwhelming, proposition.

For Fel-Pro Inc., that risk paid off in increased employee morale, loyalty and retention, which in turn raised productivity and ultimately, profitability.

“It was enlightened self-interest, and it permeated everything we did,” says former Fel-Pro executive Ken Lehman, part of the fourth generation involved in the family business. “When we invested in employees and did our best to help them, they repaid us tenfold.”

At first, Fel-Pro’s corporate social responsibility, or CSR, practices were mostly employee-centered. As early as 1952, the company started convening a monthly employee forum made up of delegates from each department. Some of the company’s family-friendly programs began as employee suggestions, including a summer camp for their children. Later, in 1983, the company opened an on-site day care, a progressive move that landed Fel-Pro on the cover of Newsweek a few years later.When your CSR goals align with the guiding principles of the organization, the pursuit of them will contribute to the organization’s financial success. 

Fel-Pro was ahead of its time with a number of socially conscious programs and practices. The company provided everything from profit sharing and wellness programs to family garden plots and booties, bonds and bank accounts for employees’ newborns.

In 1998, in its inaugural rankings of the country’s best companies to work for, Fortune magazine placed Fel-Pro at No. 4. It was evident that all the positive publicity over the years made a lasting impression on customers, Lehman says.

That positive publicity grew as Fel-Pro extended its CSR efforts beyond employee-centered initiatives and into the greater community. The company’s Better Neighborhood Fund gave small grants to employee-nominated organizations and causes. Co-founded by a Fel-Pro executive, Business and Professional People for the Public Interest pushed for air pollution reductions, fair housing policies and other social justice improvements.

“We staunchly believed that the well-being of employees and surrounding communities contributed to Fel-Pro’s success,” says Lehman, who serves as board chairman of the Evanston, Ill.-based nonprofit Winning Workplaces, an organization he founded based on Fel-Pro’s principles.

But not all companies are convinced that supporting social causes and giving back to the community drive significant, measurable profitability. For publicly held companies in particular, there is pressure to link CSR practices to bottom-line performance.

At the very least, conscientious companies should demonstrate that their practices make a difference. The first step is formalizing CSR efforts into a written policy with specific standards and goals made available to employees and the public, says Connie Lindsey, who leads Northern Trust’s Corporate Social Responsibility Department.

Successful CSR strategies that maximize impact tend to have managerial support and employee input, with goals that are consistent with the company’s mission and values.

“When your CSR goals align with the guiding principles of the organization, the pursuit of them will contribute to the organization’s financial success,” Lindsey says.

To the extent possible, companies should measure their CSR efforts for accountability and reporting purposes and make sure their efforts are leading to their desired outcomes.

Measuring the bottom-line impact of certain initiatives is straightforward. For example, a company’s increased energy efficiency and savings can be calculated. At Fel-Pro, executives were able to determine that employees who used the fitness center had significantly reduced medical costs.

Compared to quantifiable results, measuring things like employee engagement is harder because some things don’t fit on a balance sheet, Lindsey says.

Still, there are ways to evaluate these intangibles.

“Companies can track their turnover rates and compare them to their geographic location and industries. Also, progressive companies execute employee satisfaction surveys on an annual basis and get feedback on a variety of issues,” Lehman says. “Companies need to follow up and address the issues that are flagged, or employees start to believe that the exercise is not taken seriously by management.”

Potential revenue growth is not the only business benefit of CSR. Social responsibility can also aid with recruitment and retention. With increased global sensitivity to social and environmental issues, robust and earnest CSR efforts might be key to employee retention.

“If you have the best talent and low turnover, that drives financial performance,” Lindsey says.

Other CSR gains include those on the customer side such as brand differentiation and customer loyalty, which can positively impact profit margins.

As people increasingly consider the environmental and social implications of their purchases and investments, it’s an opportunity for businesses to adopt CSR practices while enhancing the bottom line.

But that doesn’t mean companies can afford to ignore the tenets of good business in favor of CSR initiatives. “Doing well by doing good” isn’t possible without first having a solid business foundation.

In Fel-Pro’s case, the company’s long term success can be attributed, at least in part, to its reputation — for both quality products and corporate integrity. “If we hadn’t mastered the basics of the business, our corporate citizenship might have won over some customers, but we would not have kept them,” Lehman says. “Companies need to master business basics first.”