Published on February 22nd, 2011 | by Lane Jost3
Social Business Good, Corporate Social Responsibility “Largely Nonsense”
A New York Times business feature on PepsiCo’s support of Mexican corn farmers has thrust a glowing light on the firm’s business practices, while simultaneously beating the anachronistic drum against the value of corporate social responsibility (CSR).
Reporter Stephanie Strom provides an interesting overview of how over 300 poor farmers in San Gabriel, Mexico have benefited by doing business directly with PepsiCo’s local processing centers. Looking to minimize marginal cost by avoiding the middle man, PepsiCo launched a pilot project through one of its local brands, the Sabritas snack food division, to expand a local source for sunflower oil. According to PepsiCo, increasing the volume of sunflower oil used in its products helps the company develop a healthier brand portfolio.
As for the farmers, the contracts they sign with PepsiCo guarantee a per unit price a priori allowing the farmers to secure the credit and other financing they need to buy seeds and fertilizer. PepsiCo wins by securing a price for corn rather than succumbing to the vagaries of the commodity markets, and the farmers win by having guaranteed sources of fixed income. The article also reports that many of these same farmers used to make risky, seasonal treks to the US to pay off debts incurred through the cultivation of their small parcels of land.
PepsiCo, seeing the obvious business benefit of the sourcing strategy, plans to expand the program to include as many as 850 farmers.
After focusing on PepsiCo’s sunflower oil supply chain in Mexico, Strom then pans out to look at other examples of corporate “social business” endeavors. She cites Danone’s well known deployment of a high-vitamin yogurt in Bangladesh (often sold by poor women) and Philips Electronics’ venture to sell solar-powered lighting products in Africa.
And then sadly we return to this antiquated and amateurish war of semantics:
“We are seeing an increased focus by companies looking to see how they can use their core capabilities for public good rather than simply writing a big check,” said Gaurav Gupta, regional director for Asia at Dalberg Global Development Advisors, a consulting firm focused on international development. “They’re starting to realize that the marginal cost of doing a little extra good produces such a great impact — and not only in terms of good will, but also because it’s good for business.”
Mr. Gupta stressed that what was emerging was not “corporate social responsibility,” a loosely defined concept typically driven by corporate marketing departments, which he said was “largely nonsense.”
There’s no doubt that CSR programs were largely spawned by an interest in reputation management. But Mr. Gupta’s quote about CSR being “nonsense” is absolutely hypocritical and patently false.
PepsiCo’s Mexican farmer strategy is bourne out of its overall global CSR strategy. CSR initiatives that do not provide bottom line returns may kick around for a little while, but will eventually fail — this pays no long term PR dividends.
Dalberg Global Development Advisors, which doesn’t report its corporate client roster on its website, no doubt does contracted work for CSR initiatives. I suspect these accounts have varying degrees of social returns, but can we please put to rest this notion that CSR is about marketing?
A firm that pursues CSR for the exclusive purpose of brand equity rather than on material business grounds will find no value in the endeavor. If we can’t agree on the semantics — CSR, CR, corporate citizenship, sustainability, etc. — can we at least be resolved to say the field is evolving and each firm must create its own path with unique business goals?
Image credit by bengarland via Flickr under a CC license