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Customer Social Responsibility

By Julia Taylor Kennedy, George Pohle | June 30, 2009

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JULIA KENNEDY: Welcome to the Carnegie Council's Global Ethics Forum. I'm Julia Kennedy.

My guest today is George Pohle. He's CEO of Suasoria and MediaBound, firms that provide management and marketing consulting to their clients. Prior to his work at MediaBound, Pohle led IBM's Global Business Strategy consulting practice. His expertise lies in marketing strategy and corporate responsibility.

I began my conversation with Pohle talking about how consumers are demanding more than a good product from businesses.

GEORGE POHLE: One of the most important factors driving corporate behavior today is the fact that many consumers are now making purchase decisions based upon, not just whether they like a product or whether it performs well, but also based upon the behavior of corporations in broader society. So it's almost a necessary requirement these days for companies to be sensitive to the needs of their customers with regard to their role in society more broadly.

JULIA KENNEDY: Tell me a little bit specifically about what you're doing with Suasoria and MediaBound. What kind of clients are you working with?

GEORGE POHLE: We work with large corporations, and also with associations and other institutions that are not necessarily for-profit-oriented.

What we primarily do is help them understand what's taking place in the marketplace today from two different dimensions. One, the needs of customers are actually changing and their behaviors are changing. And that's primarily due to the fact that they are more exposed today to information than they ever have been in the past—information about a company, its products, how the company conducts itself more broadly—and that makes them more sensitive to issues that maybe ten, 15, 20 years ago would have been much more difficult for them to get information about, let alone start to take action on. So that's one area where customer needs are definitely changing and impacting the way that they buy.

The other is that, because of the availability of the Internet, mobile phones that have sophisticated connectivity, social networks—these are all ways for people to communicate with one another more effectively. What's happening in those different channels to consumers is that those consumers are using them to talk about what they like and don't like, whether it's about a product, a service, a company's behavior. That exchange of information is becoming much more prolific than in the past.

We help companies understand how to make better sense of those channels and how to engage customers more effectively through those channels.

JULIA KENNEDY: How do companies use those channels also to communicate what they are doing on the corporate social responsibility end?

GEORGE POHLE: There's actually quite a bit of activity that's taking place there right now. It's kind of funny. In my previous role at IBM, we conducted a study where we took a look at the level of sensitivity of companies to what their customers were asking for with regard to corporate social responsibility. In fact, there has just been a recent redo of that particular study.

What they've discovered is that there's still around 40 percent of companies out there who don't really know what it is that customers expect of them when it comes to corporate responsibility. I guess, at minimum, they expect that the companies will follow the letter of the law. If they choose to go beyond that, that's obviously potentially a differentiator for the companies in the marketplace.

But companies are starting to interact more aggressively in the way that they both talk to their customers about their CSR concerns, as well as to engage them in ways that do some collaborative innovation about how they can engage the marketplace more effectively.

There are not-for-profit organizations who are likewise starting to use these new communications channels to more effectively broaden their audience and to engage people on a much more localized basis. That's also having a very positive effect from the non-business side of things, where not-for-profits of many types are really looking to broaden their reach as a counterbalancing force against what they sometimes feel is dominance of corporations in the marketplace.

JULIA KENNEDY: What did you find is that gap in between what consumers are expecting from companies in terms of CSR and what companies are providing?

GEORGE POHLE: I think the biggest gap is in reality not a gap necessarily in what's being delivered. I think the biggest gap is that the companies have a lot of different dimensions that they can take action on when it comes to corporate responsibility. It may have something to do with their carbon footprint. It may have to do with the way in which they engage local communities around a manufacturing facility. It may have to do with the way in which they treat employees in the United States, maybe abroad. It has to do with the way that they conduct themselves with regard to politics. So there are many different dimensions that companies have to be considerate of as they think about corporate responsibility.

By the same token, individual consumers are each worried about a different dimension of corporate responsibility. So the biggest gap right now is that companies along all those different potential dimensions of CSR that they could be investing in and taking action on aren't quite sure how those dimensions fit with the important dimensions on the consumers' end. And because there's a lot of complexity—so many dimensions and a lot of complexity there—it has turned out for them to be a relatively difficult task.

JULIA KENNEDY: If it is a difficult task, what is the best way you think to tackle that and close the gap?

GEORGE POHLE: There are two things.

Companies need to be much more conscious of the fact that there are a number of vehicles—i.e., these new channels we talked about—that consumers are using to communicate with one another and they need to inject themselves into those conversations in a genuine way. "We want to listen, we want to understand, and we're willing to take action, but we need to get a clearer picture from you, the consumers, as to what's really important." So that's the first thing.

The second thing is that they need to be willing to make some investments. Corporate responsibility is a domain that is as ripe for innovation as any other domain is.

So companies spend a lot of money on research and development to improve their products. They could be spending some amount of money on research and development into how to improve plant operations, reduce effluents, in ways that go far beyond what the law requires them to do.

Once they have done that, they can start to think about how they use that proactive activity that they have undertaken, that proactive innovation, to differentiate themselves in the marketplace with customers, because customers, as I said earlier, are making purchase decisions based upon companies' behaviors. When companies do find the things that are important to their customers and go above and beyond with regard to the corporate responsibility that the customers expect, they frequently can charge higher prices, they get better market share, better customer loyalty, et cetera, and that is of course something that all businesses want.

JULIA KENNEDY: I want to go back to the first point that you mentioned on ways of injecting themselves in a genuine way into these modes of communication.

What would be an example of that?

GEORGE POHLE: In some cases, companies have gone so far as to set up what I'll call a discussion forum, where what they are doing is engaging their customers by posing questions online and on an ongoing basis—think about a blog, for example—where they ask questions, they post position statements about things that they are trying to do, and formulate a set of follow-on activities based upon what customers are saying in response to their questions or their statements.

That's something that takes place pretty regularly with a number of companies. But the real fact is that blogs are pretty new. So that vehicle as a mechanism to do this kind of thing is relatively new.

There are other companies who have used focus groups for this purpose, traditional market research focus groups, to understand more about what customers are looking for on the dimensions of CSR in the past.

But blogs seem to be a much more reasonable way to do that. As long as the company is participating in an open way—they're not posing as an individual who has a particular point of view, but they are actually positioning themselves as "this is our company and here are the questions we are asking of you"—that genuine, open communication is what gets consumers to engage frequently. What can happen, however, is that if the company doesn't engage openly and they engage in some nefarious way, then consumers will react appropriately to that, and they can do themselves more damage than if they are just open about what it is they are trying to achieve.

What I find is a lot of companies find it difficult to acknowledge that they don't know something. So they feel in many cases that when they ask questions of consumers it demonstrates some sort of a weakness. But I think there are plenty of progressive-thinking companies that understand that they need to be engaging with a lot more open discussion on corporate responsibility issues, because they know less about what they should be doing there than they know in the areas where they traditionally focus.

JULIA KENNEDY: Some folks think that CSR is about just compliance with the law, not getting sued in certain different areas, and defense against that. What do you tell those people?

GEORGE POHLE: First of all, I'm very sensitive to the fact that you can lose a lot of money in a lawsuit when you don't follow the letter of the law. So yes, CSR has some aspects of it that are very important in that regard.

However, the real opportunity is to look at the other end of the scale, which is not about loss avoidance but about profit generation. So when companies do things like find ways of reducing cost at the same time as they reduce carbon footprint—or, for example, Marks & Spencer, in the way that it has undertaken a number of social responsibility initiatives, has made customers more loyal, has great profit margins on what they sell, and customers love them.

So you've got to think about CSR if you're a corporation, not just from the perspective of "how do we not get sued," but "what can we be doing here to generate greater profits?" There is certainly an alignment between CSR initiatives and a company's ability to generate greater profit.

JULIA KENNEDY: And I'm sure a big piece of that is getting the message out about what you are doing within corporate social responsibility.

GEORGE POHLE: Yes, absolutely. Getting the message out and delivering on the message at the same time.

JULIA KENNEDY: How do you advise smaller firms to become active in both these marketing and corporate social responsibility activities when a lot of those budgets are a little leaner, with less room?

GEORGE POHLE: Yes, I think it is more difficult for smaller companies to engage with CSR for a couple of reasons.

One is that, as you point out, they have fewer resources available. So while a large company might be able to take a portion of their profits and allocate the money to some aspect of CSR development, a small company may not have the wherewithal to do that.

But there are other things that can be done. Firstly, allowing the employees to engage in a local community can be as effective as launching some nationwide campaign. Local participation on the part of the employees can be a very strong mobilizing force and a very strong brand-building force in a local community. So that's one thing that can be done.

The second is that the company can, depending on the market that they're in, make corporate responsibility a core belief and manifest that belief in the way that they make their products, distribute their products or services, et cetera. That may or may not be possible, depending on the business that the company happens to be in.

But if you look at a company, for example, like Patagonia, that makes outdoor clothing and those sorts of things, it has long established itself at the very beginning as a green company and has continued to play an important role in green issues. They have grown to become a much larger company, but even when they started they were very conscientious about making that a differentiator of their business, and it was very successful at positioning them at the very high end of the industry that they're in.

JULIA KENNEDY: People sometimes dub corporate social responsibility as an effort that businesses make towards marketing, that they do a little bit in order to say a lot. That's a common accusation. How do you advise companies to avoid that perception?

GEORGE POHLE: The most important thing that a company has to do as they embark on a CSR effort that would be new to their business—because many companies are already doing things here or there that relate to CSR—there has to be a commitment to actually execute on the overall CSR initiative, and the execution has to come before the communication and the "marketing" of it.

As soon as the marketing piece gets separated from the actual execution and operations of the company, that's when you have a problem. So that's when you have "greenwashing," those sorts of issues, come, because companies are sending a message into the marketplace that's way beyond where they actually are and way beyond what they are actually delivering. So this is another case where they can do themselves more harm than good, if they don't have that commitment to execute on the CSR initiative before they go spend a lot of money on marketing and advertising. So execution and marketing have to go hand in hand.

JULIA KENNEDY: What sort of strategy do you think works well for companies that are just starting? A lot of companies have a little program here or there. Some companies haven't even started and, especially from the environmental sustainability standpoint, are saying, "Okay, it's time." How do you advise those companies?

GEORGE POHLE: Most of my clients are not very small companies. However, we are a small company. So I could tell you that from my perspective the most important thing to understand is the needs of your customers. So, going back to the issue of the key constituents, the customers' needs are going to be most important, the employees' needs are going to be very important, and to some degree the local community, depending on how the business is structured, can be very important.

So it's important for those companies to make sure that they have engaged each one of those different constituents at some level to understand the minimum of what is expected of them and, beyond that, what they could be doing that would really make them stand out in their particular industry. That is not something that it takes a large business to do. That's just a question of opening the communications channels to those different constituents.

JULIA KENNEDY: You see a lot about environmental sustainability now, which is clearly really important. About ten years ago you saw a lot about labor. So how do you balance those initiatives?

GEORGE POHLE: This is why management gets paid the big bucks, right? There are so many different dimensions that they have to manage. I view it this way, that they have to keep a portfolio of CSR initiatives going. Some of those CSR initiatives are going to be things that they have always done just to make sure that they are not doing things that are illegal. There may be, say, 60 cents on the dollar that they spend on that.

I think they should be thinking about ways of more effectively contributing, by philanthropy in some cases. Some companies do that. Other companies don't feel that's the right thing for them to be doing.

But, even more importantly, I think they should keep a portfolio of operational initiatives that specifically lead towards potential cost-reduction opportunities. Think about changing out light bulbs, which reduce carbon emissions but give the same amount of light. That's a cost-saving initiative that does have social impact, even though it might seem somewhat mundane.

And even beyond that, to think about ways that they can generate new revenue opportunities from CSR initiatives.

So at the end of the day, if they've got a balanced portfolio where they are spending money in those different areas, I think they are going to be able to really see new opportunities, not just to not get punished, but also opportunities to really do something new and innovative that makes a difference with their customers.

JULIA KENNEDY: How does the financial crisis approach the way that companies view corporate social responsibility?

GEORGE POHLE: I think the financial crisis, in combination with the recession—you would think, because there are much more significant financial constraints that companies are dealing with, that they would have gone back on their commitment on CSR from, say, a couple of years ago.

This is where the study that IBM has released kind of confirms that actually the opposite has happened, that CSR initiatives have become even more important nowadays. One of the reasons why is that there is no going back on the awareness of consumers as to the corporate behavior of these corporations now. You can't erase the Internet or the availability of information. So the CSR sensitivity is still there, and that hasn't gone away. In fact, it is probably getting more and more important in their decision-making.

So, despite the fact that you'd think that the recession or the financial crisis would negatively impact CSR requirements, the consumers haven't really changed their behaviors, and, as a result, companies realize that it hasn't gotten less important, it continues to get more important.

JULIA KENNEDY: Have you noticed any trends that are a little disappointing, that you would like to see go away, emerge in this arena of corporate social responsibility?

GEORGE POHLE: I think one that we touched on earlier was just this whole notion of greenwashing. It goes beyond just being green. It goes across all the other dimensions of corporate responsibility—how you treat employees, et cetera.

To me what you hear from corporations is that they are trying to take action and they believe that they know what the customers want. But the fact that 40 percent haven't even talked to the consumer about what it is they want kind of makes you think twice about how far they have really gone to understand what it is that they should be doing.

So to some degree I think that many companies believe that they are farther ahead in their CSR initiatives than they really are. So there's a contradiction there. You can't be so far ahead if you haven't even asked what's important.

JULIA KENNEDY: Any heartening trends that you see?

GEORGE POHLE: Yes. I think the whole issue of this recession not impacting the decision-making criteria on the part of consumers is an important one.

What I'd like to see is commitment on the part of consumers to continue to spend the money on the companies that make the effort to do what consumers say is important. That's something that, obviously, for some people will be easier than others, depending on their personal economic situation. But it really will come back to the consumer to change their behaviors and to stay on top of these issues continuously.

And what's important today is not necessarily going to be what people are going to be sensitive to in 12 months or 24 months. There will be new issues with regard to society that will become hot issues or important issues that customers are going to jump on top of and corporations will have to likewise shift some of their investment in that portfolio that I discussed earlier.

JULIA KENNEDY: I would imagine that's probably one of the biggest hurdles in this realm, that consumers are focusing on one thing that maybe they weren't focusing on ten years ago, and what they were focusing on ten years ago doesn't matter as much to them now. Have you seen that?

GEORGE POHLE: Right. I agree that that can be an important issue. But to my clients the way I position this issue is that the customers' needs with regard to their core product is changing all the time as well. They are more comfortable that they can stay on top of those changes and that a competitor is not going to come out of left field and do something completely different. But that's what they have always been in business to do. And guess what? It's still the same person who's buying the product that is sensitive to the way that they are behaving.

So they have sense-and-respond systems that they have built to figure out what is taking place with their product. Well, they can use those same sense-and-respond systems to engage the customer on corporate responsibility issues as well.

JULIA KENNEDY: When you're talking to your clients, as you know, obviously talking to corporate clients there's a lot of emphasis on the bottom line and on what this can do for your company and what it can do for your consumers. Do you find that strategy of talking to them about corporate social responsibility, about the bigger picture, and what role corporations should be playing—do you use that as well?

GEORGE POHLE: Not from a theoretical perspective, because I think the funny thing is when you talk to any individual about what they think is important, what you find is that, regardless of whether they are acting in their role as a consumer or acting in their role as a corporate executive, the kinds of things they personally find important are pretty consistent, which is good. So people can represent their personal beliefs within the context of their corporate decision-making.

A lot of companies have core values that they have established in terms of how they want to behave as a corporation that reflect that. So I think that's a very positive thing.

I think the challenge is to translate a value that says "we're going to do good things for society" into the specific actions that are going to take place. And again, those actions have to be invested in and continually stayed on top of, at least at the same time as they are communicated into the marketplace, so you don't get to the point where now you've greenwashed something that you're not really doing.

That sort of management requirement is no different than running any other part of the business. No matter what you do in a company, you've got to set the objectives, invest, build the capability, and then communicate it to somebody who would care about what you have just done. It's really no different at all from that kind of a process that takes place every single day in these businesses.

So some businesses look at CSR and they say, "Well, that's really nothing new. There are some different focus areas than we've had in the past. But we know how to manage this sort of thing."

There are other companies that look at it and say, "Well, it seems pretty foreign because it's not quite so financially tangible as we'd like it to be." Therefore, they may have a little bit more difficulty in making progress than other companies.

The main issue here is that it is the market that's talking. That's why companies can't ignore it, right? There's more information available to people. They now make different decisions based upon the information. At the end of the day that's not going to go away, that's not going to change. So companies are paying attention.


George, thanks so much for sitting down with me in the Carnegie Council's studio.

GEORGE POHLE: My pleasure. It was great to be here.

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