Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the hot issues and opportunities facing Canada’s small businesses. I’m your host Ian Portsmouth, the Editor of PROFIT Magazine and we’ve developed this Podcast in cooperation with BMO Bank of Montreal.
While terms like corporate social responsibility and ethical management and community investment pepper the business media today, they’re often discussed in association with big multinationals, especially in the aftermath of some kind of financial or environmental scandal. But there are advantages to these things for small and mid-size companies too. And here to discuss them is Paul Klein, the Founder and President of Impact, a Toronto-based Advisory to companies in the area of corporate responsibility and community investment. Paul, welcome to the Business Coach.
Paul: Thank you.
Ian: So, let’s start off by defining community investment. What’s your definition and what does that consist of?
Paul: Well, the way we look at it is really the sum total of all the direct and indirect actions that define what I call a company social purpose. And that is its relationship to society more than just making money. So the kinds of things that community investment would include donations of course to charitable organizations, sponsorship, volunteer activities of its leadership and employees, in-kind donations that is donations of products and or services. And of course a key part of it is actually the degree to which what a corporation’s main business purpose is or whatever it makes or provides is in itself responsible.
Ian: So the activity of community investment can be both an explicit or an overt action and things that are more implied.
Ian: So what is the business case for community investment if you can articulate that briefly?
Paul: Yes, we’d seen enough I think that you mentionned before that large corporations are perhaps more involved in this but I believe that the business case is equally strong for small and medium size businesses. But I would have to say that the first and most important stakeholder audience here are employees. There are a few things, there are a few direct business benefits relating to employees and one is recruitment. And there is lots of evidence both here and in the U.S. and elsewhere that says that people, especially younger people really do want to work for companies that care about the way they impact or contribute to society. And that could upwards of 75 to 80 per cent of people in say 10 to 25, these are people for whom this stuff is very very important. So what a company does in these areas can actually aid in recruitment and retention. On the retention side, specifically, there is also lots of evidence that says that you know, where companies are actively engaged in these areas, there is more employee loyalty. And I also believe that one would also see higher levels of productivity in corporations where there are a lot of community programs where employees are involved. So the employee piece for me is much important.
Ian: What about customers?
Paul: As an example, one of the things that’s happening and if you want, referring a lot about the degree to which companies like Wal-mart or other mass retailers have made social environmental responsibility an important part of their businesses. So what’s happening there is they are starting to look at their own suppliers in ways which they didn’t before. So they’re saying ok, our suppliers now have to conform to a different set of expectations in terms of environmental issues which is happening already and I think social issues as well. So I think the smaller and medium size who sell into larger corporations to actually understand what the priorities are of their customers in this area. Not that they have to do everything in the exact same way but I think that at least, the very least communicating that you as a company are addressing these areas that are important to your customers as important.
Ian: Now you mentioned earlier that community investment is a great way to help, attract and retain employees. So when you’re deciding where to make that investment in your community, how much should employees be involved and how much of that decision really belongs to the business owner?
Paul: The main thing here I think is that in the end, whatever a company does in this area has got to be seen as genuine, as authentic, as you know something which is you now not opportunistic but something which a corporation is actually really committed to. So the fact that a business owner might feel very deeply about a particular issue is really important. The fact that a corporation company has taken the time to ask its employees what kinds of issues are important to them, be it social issues, environmental issues and so on, and as a company has decided to get behind those issues add a huge amount to the degree to which that company and its efforts in this area are seen to be authentic. It’s a combination and I guess the big learning here is that it’s hard to know what the exact balance should be between the owner and the employees but the main thing is, the starting thing point is looking internally rather than externally.
Ian: And when it comes to that stage where you are looking externally to pick that cause, how do you make that decision? What briefly are some of the factors that you would draw into that decision because there are so many worthy causes out there and I think a lot of entrepreneurs and businesses just tend to get frozen by the multitude of choice?
Paul: You are right, there are a lot of criteria. The things that I think are important are these. First of all what are the issues that are important in the area where you do business? If you have a company that is located in Toronto, there are certain things that are very important socially, environmentally that may be different that if your company is located in Montreal or somewhere else. So I think having an understanding of really what matters is important. And I mean clearly you don’t want to be supporting something that is a no relevance. So you want to be supporting something which is important and which is relevant locally. And the other factors are you want to have a good understanding of what your competitors are doing because if, you know, a competitor of yours is supporting some issue in the organization, you know, it is probably not a good idea to be doing exactly the same thing, so because there is an ability here to differentiate your company by doing something which is distinctive in some way. And the other thing is in term of the organization you might support, to what degree can your company actually stand out is an important question. And I don’t know, to use maybe a bigger picture example but there is, the whole breast cancer world is obviously is a very important issue but there is lots of people in there right now, lots of different companies are in there. Would it be easy for a company to stand out in that milieu today? I don’t think so, even though the issue is important.
Ian: Now of course the big question I think in all of this is how do you promote your community investment activities to employees, customers and the like without appearing self-serving?
Paul: Well I think here is where the importance of having relationships with charitable organizations come in. All too often, I think what you see is companies large and small actually, the relationship with a charity is giving money and that’s where it stops. I think there is a whole lot more that can be done, that can aid in a bad communication. And here is what I mean. As an example, companies first of all are not experts in issues, these non-profit and charitable organizations are. So I think it is better in terms of communicating what you do in this area to say ok, you know we believe, just to make something up, we believe that the environment is important to us and you know, we are going to communicate that externally, internally and so on. If one were to look at doing it another way, to say ok, let’s work with an environmental organization who’s supporting an issue that we believe in. Let them communicate to our audiences externally and internally and we just take a little bit of a back seat there to the organization. I think that adds a huge amount in terms of the degree to which a corporation will seem to be credible not self serving.
Ian: That’s great advice Paul. That’s all the time we have for today. But thank you for joining the Business Coach.
Paul: You’re most welcome. It’s a pleasure.
Ian: Paul Klein is the Founder and President of Impact, a Toronto base Advisor in the companies area of corporate responsibility and community investment.
Well that’s it for another episode of the Business Coach Podcast. You can download other installments in the series from BMO.com, profitguide.com or iTunes. And as always, I would love to hear your feedback and suggestions for future topics. You can send them to email@example.com.
Until next time, I am Ian Portsmouth, Editor at the PROFIT Magazine, wishing you continued success.