By John Almandoz and Carlos Rey

It’s one thing to talk about corporate purpose, quite another to make it happen in a way that has real-world meaning for those at all levels of the organisation. In this article, the authors offer a framework designed to assist leaders in doing just that.

Corporate purpose has become a hotly debated topic in recent years, yet its practical implementation often lags behind the rhetoric. Defining purpose is only the starting point; the real challenge lies in living it—creating an emotional connection to a set of ideals and translating them into tangible actions and practices. Purpose is not a slogan; it is a strategic and cultural force that shapes how organisations operate and how they impact society.

This article explores purpose-driven leadership as a multidimensional concept, combining internal motivations—the intrinsic and transcendent motivations of employees—with external impact—in response to societal or environmental challenges. Drawing on insights from companies such as Unilever, Best Buy, ISS, La Fageda, Anglo American, and DaVita, we examine how leaders can embed purpose into the very fabric of their organisations—turning aspirations into reality.

Corporate Purpose Dimensions

Recent research identifies two complementary perspectives of purpose—inside-out and outside-in¹—along with three key dimensions—head, heart, and hands². Together (figure1), these lenses offer a robust framework for leading with purpose, enabling leaders to transform it from an abstract ideal into a living force that inspires people and shapes society.

Inside-Out and Outside-In Perspectives

Understanding corporate purpose begins with two complementary lenses: inside-out and outside-in. Together, these perspectives illuminate how organisations balance and integrate internal motivational alignment with the external impact that society increasingly demands.

• Inside-Out: this perspective focuses on aligning an organisation’s purpose with the values, beliefs, and aspirations of its members. When employees find personal significance in their work, they become more passionate and committed, contributing energy and creativity to organisational goals. Leaders play a critical role as “meaning-makers,” articulating a purpose rooted in core values and inspiring employees by making their impact visible—connecting daily tasks to service or a greater cause.
• Outside-In: this perspective emphasises a company’s responsibility to address broader societal and environmental challenges, such as social injustice and climate change. Leaders adopting this perspective act as “statesmen,” prioritising systemic impact, building legitimacy, and collaborating with external organisations to advance social causes.

The Three ‘H’ Dimensions of Purpose

Purpose is not one-dimensional. It comes to life through three interconnected dimensions—head, heart, and hands—that transform lofty ideals into strategy, emotion, and action.

The Head

Purpose must be clear. This dimension focuses on the rational articulation of purpose. It involves defining and clearly communicating the organisation’s reason for being, answering questions such as: What is our business for? What should our business become? The head dimension establishes a coherent vision that connects strategic objectives with societal contributions.

The Heart

Purpose must resonate emotionally, not just intellectually.

Purpose must resonate emotionally, not just intellectually. The heart dimension ensures that purpose aligns with the values and aspirations of stakeholders, creating a shared sense of meaning. Emotional engagement is cultivated through stories and narratives that bring purpose to life, inspiring genuine commitment and passion.

The Hands

Purpose must be operationalised. The hands dimension ensures that purpose is embedded in actions, decisions, and day-to-day operations. This includes aligning performance metrics, integrating purpose into incentives, and demonstrating commitment through leadership and participation in initiatives—even social movements. The hands dimension transforms purpose from an aspirational ideal into a lived reality.

The Six Key Drivers of Purpose Implementation

Purpose-driven leadership is not a one-time declaration; it is a continuous process that requires alignment across strategy, culture, and operations. Within the inside-out and outside-in perspectives—and across the dimensions of head, heart, and hands—we identify six fundamental drivers that enable organisations to lead with purpose effectively (see table 1).

1. Crafting an authentic purpose (Head–Inside-Out)

Defining and communicating a company’s purpose is the cornerstone of the inside-out approach. This involves articulating why the organisation exists and what makes it unique—not as a vague aspiration, but as a rational foundation for strategy and decision-making. A well-crafted purpose brings clarity, aligns teams, and strengthens identity.

Authenticity is critical. Purpose must resonate with the company’s values and culture, making it more than words on paper. Many organisations draw on founder motivations or internal stakeholder needs. For example, La Fageda was born from Cristóbal Colón’s vision to provide meaningful work for people with mental disabilities. Yogurt production became the means to fulfil a deeper social mission—the actual work could have been something very different— creating a strong sense of identity and shared meaning.

Similarly, Unilever, under Paul Polman, revisited its historical roots to shape a narrative that connected sustainability with its core business. DaVita engaged employees at every level to co-create and articulate its values, fostering ownership and alignment. Best Buy used executive retreats and workshops with frontline staff to define its values, which ensured broad buy-in, turning purpose into a shared commitment. Other companies may use tools such as the Ikigai framework—exploring the intersection of contribution, passion, capabilities, and financial sustainability—to help them define a purpose that inspires and endures.

2. Articulating how purpose addresses societal challenges (Head–Outside-In)

A purpose confined to internal motivations risks appearing self-centered or narrow. Increasingly, companies are redefining their purpose to address societal challenges—social, environmental, and ethical. This outside-in perspective involves engaging with systemic issues and aligning the company’s mission with broader stakeholder needs.

Unilever exemplifies this evolution. Beyond its roots in hygiene and nutrition, it championed sustainability and social equity through initiatives such as the Unilever Sustainable Living Plan, the €1 billion Climate and Nature Fund, and campaigns like #Unstereotype. Its brands integrate activism into messaging, advancing causes like climate justice and body positivity. The company’s commitment extends to ensuring living wages across its supply chain and combating modern slavery—actions that reinforce trust and legitimacy.

Other organisations, such as La Fageda and ISS, expanded their impact by supporting communities and improving working conditions. Patagonia shifted from producing outdoor gear to leading environmental activism. These efforts demonstrate that success can be measured not only by profit but by contributions to societal well-being.

3. Harmonising personal and organisational purpose (Heart–Inside-Out)

Purpose must be internalised—not just understood intellectually but felt emotionally. This inside-out “heart” dimension transforms corporate values into a shared source of motivation. When employees see how their work improves lives, engagement deepens. Motivation becomes more intrinsic and transcendent.

Best Buy’s CEO Hubert Joly reframed the company’s mission around “happiness,” inspiring employees by connecting their efforts to customer well-being. Research by Adam Grant shows that gratitude from beneficiaries significantly boosts employee commitment. Companies like ISS and DaVita reinforce this connection through storytelling, recognition rituals, and symbolic language—calling employees “teammates” or “citizens” and referring to the company as a “village.” These practices foster belonging and shared purpose.

True internalisation also requires leaders to show genuine care for employees, recognising their values and aspirations. Initiatives such as ISS’s community programs strengthen emotional bonds. Large-scale training, like Unilever’s personal purpose workshops, illustrates how embedding purpose throughout the organisation can inspire thousands and foster a vibrant, purpose-driven culture.

4. Inspiring stakeholders through purposeful brands and narratives (Heart–Outside-In)

Internal alignment is essential, but credibility depends on external legitimacy. Companies with a strong outside-in “heart” perspective inspire stakeholders by addressing societal challenges and championing meaningful causes. Leaders act as statesmen and responsible role models, setting industry standards and rallying others to create positive change.

Purpose-driven marketing connects brands with values. When companies weave their mission into slogans and campaigns, they differentiate themselves and build loyalty. Examples include Warby Parker’s “Buy a Pair, Give a Pair” initiative and Dove’s body positivity campaign, which embed social impact into brand identity. Rebranding around purpose can transform culture. DaVita, meaning “giving life,” rebranded itself and took that name to foster a community-first mindset focused on service. These narratives galvanise not only employees but also patients and their families and creates goodwill in the communities  proving that purpose can be both inspiring and commercially powerful.

5. Embedding purpose into behaviours and systems (Hands–Inside-Out)

Purpose must move beyond words and emotional connection to become actionable. The “hands” dimension ensures that purpose is integrated into core processes—recruitment, performance evaluation, promotion, and incentives. When behaviours and systems reflect values, purpose becomes a lived reality.

When behaviours and systems reflect values, purpose becomes a lived reality.

Companies operationalise purpose by equipping employees with tools and knowledge to embody values in their work. ISS conducts workshops for frontline staff, while DaVita uses recognition systems to reward values-driven behaviour. In both organisations, team-building activities connect leaders to the mission through service, reinforcing cultural alignment.

Measurable goals are essential. Leading companies like Unilever and Best Buy set ambitious targets—from sustainability milestones to employee engagement metrics. Tracking progress demonstrates commitment and builds trust among stakeholders.

6. Measuring impact and securing external validation (Hands–Outside-In)

Internal systems are vital, but self-assessment alone can lead to bias or complacency. To ensure objectivity, organisations increasingly adopt external frameworks such as ESG (environmental, social, and governance) criteria, SROI (social return on investment), and certifications like B Corp. These tools provide rigorous methods for quantifying impact and benchmarking against global standards.

External validation enhances credibility and drives continuous improvement. By integrating these frameworks into operations, companies demonstrate that their commitment to purpose is genuine, measurable, and aligned with societal expectations.

Starting from Within: Leadership at the Crossroads

Leadership stands at the crossroads of the inside-out and outside-in perspectives of organisational purpose, serving as the pivotal force that unites them. Great leaders don’t just connect with their organisation’s history and core values; they cultivate authenticity and pride among employees, building a strong, cohesive culture. This deep internal orientation, as shown in the example of La Fageda, can create lasting bonds, but risks an excessive company-centered outlook unless balanced with openness to the outside world.

Equally important is a leader’s ability to interpret and respond to the shifting expectations of society and external stakeholders. By integrating their organisations into broader social systems and engaging with groups such as unions, as demonstrated by ISS, and regulators, leaders ensure that their companies remain both legitimate and impactful beyond internal boundaries. The best leaders understand that external collaboration amplifies their organisation’s collective influence and credibility.

However, our research—based on these six cases presented in this article and over 100 companies studied across 15 years—shows an important sequence: authentic purpose-driven leadership starts from the inside-out and is reinforced by the outside-in engagement, not the other way around. True purpose isn’t imposed by outside pressures or regulatory demands. It’s first forged in a leader’s personal convictions, often rooted in the values and company history, then refined by responding to the world around them. When this sequence is followed, inside-out and outside-in perspectives reinforce each other, creating a meaningful and sustainable sense of purpose.

The six-drivers framework illustrates how purpose may spring from within, then may grow to shape the world outside, uniting personal conviction and societal impact. When leaders inspire their organisations with genuine purpose, they not only foster social change but also infuse daily work with meaning. Lasting purpose is not an external mandate; it is a journey that begins in the head, heart, and hands of leaders and radiates outward, transforming both business and society.

Cynthia Carroll’s early leadership at Anglo American shows how inside-out and outside-in purpose can be mutually reinforcing. She began with a deeply held personal conviction that every miner deserves to return home safely, which directly confronted one of the mining sector’s most entrenched societal challenges. Rejecting the industry’s fatalism about deaths, she reframed safety as a moral non-negotiable, then worked to translate this conviction into organisational purpose by building a guiding coalition of internal influencers who shared her intolerance for preventable harm and by inspiring broader stakeholders with a bold narrative of “zero harm.”

Yet she quickly discovered how difficult it was to embed this purpose into behaviours, systems, and mindsets across a vast, hierarchical, and historically divided organisation. With little external pressure for reform, Carroll deliberately activated outside-in forces by engaging the South African government, the National Union of Mineworkers, and local communities to form the Tripartite Alliance, an unprecedented partnership aimed at raising safety standards across the entire industry. She opened the company to public scrutiny, co-hosted a national safety summit, and initiated global benchmarking of best practices. The results were substantial: fatalities fell from 44 in 2006 to 17 in 2011, a 62 per cent reduction. Over time, she built mechanisms for measuring impact and securing external validation, revealing a central truth: authentic purpose can spark transformation, but operationalising it demands sustained coalition-building, systemic redesign, and the intentional mobilisation of societal actors.

About the Authors

John Almandoz, Professor of Managing People in Organizations at IESE Business School and Juan Antonio Perez López Chair, brings industry and nonprofit experience and Harvard training in organisational behaviour. He publishes on corporate purpose and societal institutions in top journals, and teaches leadership across MBA and executive programs.

Carlos Rey is founder of DPMC Foundation and Director of the Chair in Management by Missions and Corporate Governance at Universitat Internacional de Catalunya (UIC Barcelona). He is the co-author of Management by Missions, published in six languages, Purpose-Driven Organizations: management ideas for a better world, and other books and articles in leading academic journals.

References

1. Almandoz, J. (2023). “Inside-out and outside-in perspectives on corporate purpose”. Strategy science, 8(2), 139-48.

2. Rey, C., Bastons, M., & Sotok, P. (2019). Purpose-driven organizations: Management ideas for a better world. Springer Nature.

Sources to read more about these companies

1. Joly, H. (2021). The Heart of Business: Leadership Principles for the Next Era of Capitalism. Harvard Business Review Press.

2. George, W. W., Palepu, K. G., Knoop, C.-I., & Preble, M. (2013, May 23). Unilever’s Paul Polman: Developing Global Leaders (HBS Case 413-097). Harvard Business School.

3. Almandoz, J., Lee, Y.-T., & Vila, N. (2010). “A Legacy of Purpose and Achievement at ISS Spain” (IESE Case DPO-0910-E). IESE Business School.

4. Segarra, M., Ochoa, I., & Segarra, J. A. (2008). “La Fageda: An Outrageous Initiative” (IESE Case IES227-PDF-ENG). IESE Business School.

5. O’Reilly, C., Pfeffer, J., Hoyt, D., & Drabkin, D. (2014). “DaVita: A Community First, A Company Second” (Stanford GSB Case OB89). Stanford Graduate School of Business.

6. Carroll, C. (2012, June). “The CEO of Anglo American on Getting Serious About Safety”. Harvard Business Review, 90(6), pp. 43–6.

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By Adrian Furnham

Is the world a just place – or just a place? Then again, should we just pessimistically expect the unjust and so avoid disappointment? As Adrian Furnham explains, a little bit of faith in the ultimate fairness of it all could be your best armour against the arrows of outrageous fortune.

• Fairness is man’s ability to rise above his prejudices. – Wes Fessler
• Win or lose, do it fairly. – Knute Rockne
• Be fair. Treat the other man as you would be treated. – Everett W. Lord
• Justice is a certain rectitude of mind whereby a man does what he ought to do in circumstances confronting him. – Saint Thomas Aquinas
• Nothing can be truly great which is not right. – Samuel Johnson
• It is not fair to ask of others what you are unwilling to do yourself. – Eleanor Roosevelt
• Fairness is what justice really is. – Potter Stewart
• These men ask for just the same thing, fairness, and fairness only. This, so far as in my power, they, and all others, shall have. – Abraham Lincoln
• Though force can protect in emergency, only justice, fairness, consideration and cooperation can finally lead men to the dawn of eternal peace. – President Dwight Eisenhower
• Expecting the world to treat you fairly because you are a good person is a little like expecting the bull not to attack you because you are a vegetarian. – Dennis Wholey
• In our hearts and in our laws, we must treat all our people with fairness and dignity, regardless of their race, religion, gender or sexual orientation. – President Bill Clinton
• Live so that when your children think of fairness and integrity, they think of you. – H. Jackson Brown, Jr.

Count the use of the “F-word” in politicians’ speeches: yes, Fair. Many believe that if you appeal to a voter’s sense of fairness, you can simultaneously provoke enough positive and negative emotions to secure a vote for their party position. We all want to be fairly treated and live in a just world. But can we agree on the what is fair and unfair, just and unjust? And how do people react differently to lack of justice?

Different Perspectives

There are clearly many very different understandings of why there is such manifest and obvious injustice and unfairness in the world.

Ellenbogen (1986), in a very memorable and humorous way, distinguished between how different religions understand injustice. These are rather simple-minded stereotypes, and possibly even “offensive” to certain groups, because of the way they try to encapsulate and distinguish between various conceptualisations of injustice. It illustrates forcefully some of the numerous and profound differences in the ways injustice / evil / sh*t is considered.

It is clear that injustice, here described as “sh*t happens”, is an extremely important issue and that many struggle for an explanation for its existence, but also how to cope with it. It is very big topic indeed. The fundamental “take-away” is to take a much wider view. All peoples have had to confront injustice and explain why it occurs.

The moral of the story? There are clearly many very different understandings of why there is such manifest and obvious injustice and unfairness in the world … and therefore of how you should try to confront and ameliorate it.

Equity and Justice Sensitivity

There are clearly individual differences in the extent to which people are sensitive to events: that are fair, just, and right or the opposite. There are two psychological constructs in this area: the older construct of equity sensitivity and the newer construct of justice sensitivity. The focus of equity sensitivity is on the outcome of an allocation, which limits the construct to distributive justice.

The focus of justice sensitivity is on the role a person can play in any incidence of injustice. A person can be the victim of injustice (victim sensitivity), the observer of injustice (observer sensitivity), the beneficiary of injustice (beneficiary sensitivity), and the perpetrator of injustice (perpetrator sensitivity). Thus, the concept of justice is not limited to distributive justice in the justice sensitivity construct, but includes all kinds of injustice (distributive, procedural, retributive, restorative, interactive, legal).

Researchers have determined three different types of justice-sensitive people: benevolents, equity sensitives, and entitleds. Benevolents are referred to as “givers”, because they are willing to bestow as much as possible on people and organizations but are relatively unaffected by unfair treatment. They are prepared to experience personal discrimination, unfairness, and injustice for a variety of personal reasons, and unlikely to complain or attempt some recompense. Some religions would strongly approve of this behaviour, which is self-sacrificial for the greater good.

The counterparts are entitleds, who are also labeled “takers”. Their ultimate ambition is to maximize their outcomes. They appear selfish, egocentric, and deeply concerned about getting what they can from others. In between, there are “equity sensitives”, who seek to achieve a balance between input and outcome.

As these different categorizations suggest, there are systematic and predictable behavioral differences between the three types. Benevolents are more likely to tolerate unfair payment, whereas entitleds are more likely to react more strongly than benevolents to pay inequities by reducing their job performance. There are interesting questions about the development of justice sensitivity and how it can be appropriately moderated.

Another important difference is the assumed dimensionality. The justice sensitivity construct conceptualizes all facets (victim, observer, beneficiary, perpetrator) as potentially independent components (a person can be victim sensitive and beneficiary sensitive). By contrast, equity sensitivity is a one-dimensional construct (a benevolent person cannot be entitled). These differences have important implications for measurement and research on developmental origins, behavioral outcomes, and correlations (with personality traits, for example).

Justice sensitivity research has shown that all facets have some uniqueness, which means that they overlap only partially and that they have unique relations with other variables. Yet all studies show a systematic pattern of overlap among the facets. Observer, beneficiary, and perpetrator sensitivity correlate highly among each other and seem to reflect a genuine concern for justice for others. Victim sensitivity correlates only moderately with the other factors.

Here are some questions from a measure of equity sensitivity

1. It is really satisfying to me when I can get something for nothing at work.
2. It is the smart employee who gets as much as he / she can while giving as little as possible in return.
3. Employees who are more concerned about what they can get from their employer, rather than what they can give to their employer, are the wise ones.
4. When I have completed my task for the day, I help out other employees who have yet to complete their tasks.
5. Even if I received low wages and poor benefits from my employer, I would still try to do my best at my job.
6. At work, my greatest concern is whether or not I am doing the best job I can.

Belief in a Just World

It is apparent that all people have a need to believe that they live in a world where people generally get what they deserve; there is justice in the end. Good deeds are rewarded; bad are punished. This belief enables them to confront the world as though it were stable and orderly. Without these beliefs, it is difficult for people to commit themselves to the pursuit of long-range goals. The BJW has an adaptive function, which is why people are very reluctant to give up this belief. It is very distressing to be confronted with evidence that the world is not really just or orderly after all.

Here are some statements from a classic measure of the just-world beliefs:

1. Basically, the world is a just place (J)
2. People who get “lucky breaks” have usually earned their good fortune (J)
3. Careful drivers are just as likely to get hurt in traffic accidents as careless ones (UJ)
4. Students almost always deserve the grades / marks they receive in school (J)
5. People who keep in shape have little chance of suffering a heart attack (J)
6. The political candidate who sticks up for his principles rarely gets elected (UJ)
7. In professional sport, many fouls and infractions never get called by the
   referee (UJ)
8. By and large, people deserve what they get (J)
9. Good deeds often go unnoticed and unrewarded (UJ)
10. Although evil people may hold political power for a while, in the general course of history, good wins out (J)
11. In almost any business or profession, people who do their jobs well rise to the top (J)
12. People who meet with misfortune have often brought it on themselves (J)

Believing that the world is just seems to provide psychological buffers against the harsh realities of the world, as well as personal control over one’s own destiny. It is a way of eliminating injustice by victim derogation; that is why people blame victims of a range of misfortunes for their plight. People feel less personally vulnerable and have lower perception of risk because they believe they have done nothing to deserve negative outcomes. It seems the BJW developmental and life-span literature suggests that it is fairly stable across the life-span.

It is apparent that all people have a need to believe that they live in a world where people generally get what they deserve.

It  possible for some people to believe that the world was just (people got what they deserve), unjust (the good and virtuous were punished) and the a-just or random world where just deeds were randomly rewarded and punished. Also, there are different worlds: the personal, interpersonal, and social world. People can believe in different worlds for different reasons. One might believe the political and economic world to be unjust, but the world of personal relations just. But most of all, for many the world was a-just. It rains on the just and unjust alike (Matthew 5). However, some would argue that whether or not the world is just, it could be made fairer.

It may be more seriously disadvantageous to believe that the world is unjust as opposed to just. Imagine believing that good actions are punished, as opposed to rewarded, or that good people are assassinated while dictators live to an old age. A major development at the turn of the millennium was to view the BJW as a healthy coping mechanism, rather than being the manifestation of antisocial beliefs and prejudice. Studies have portrayed BJW beliefs as a personal resource or coping strategy, which buffers against stress and enhances achievement behaviour. Of course, as pointed out above, one could believe in a just personal world, an a-just interpersonal world, and an unjust political world at the same time. Further, there must be degrees to which the world is just or unjust, not simply a stark binary option.

For the first time, BJW beliefs were seen as an indicator of mental health and planning. This does not contradict the more extensive literature on BJW and victim derogation. Rather it helps explain why people are so eager to maintain their beliefs, which may be their major coping strategy. BJW is clearly functional for the individual. Rather than despise people for believing that the world is (relatively) just, which certainly we teach our children, the BJW may be seen as a fundamental, cognitive coping strategy. However, the directionality is not always clear: Do mentally healthy people believe that the world is just, or do just-world believers deal better with the “slings and arrows of outrageous fortune”? Or, indeed, is there actually a reciprocal causal relationship? Believing the world is just when it is not may be a maladaptive, bruising experience.

One question is how BJW is related to other coping strategies which are favoured by healthy individuals who have low BJW beliefs. Again, the focus is on how BJW relate to personal experiences, rather than those of others. Is it true that “what goes around comes around”? For the most part, good deeds are rewarded, and vice versa. That the bad are punished and the good rewarded is what we teach our children, though we no doubt all believe that this simple observation needs to carry a caveat and be explained.

Conclusion

Now, more than ever, people seem sensitive to issues of fairness at work – who is promoted, selected, and sacked, and why. Why people are paid what they are. How bullies are dealt with. The psychological research has shown that we can understand how, when, and why people take different positions with respect to what they think is just and fair, which helps explain how they act as they do. And beware the manager who is not able to understand and deal with these issues.

About the Author

Adrian Furnham has always been interested in these issues because he grew up in South Africa, at that time a deeply unjust society. He is currently an emeritus Professor at the Norwegian Business School, situated in a country well known for its attempts to bring fairness and justice to all.

References:

1. Bartholomaeus, J., & Strelan, P. (2019). “The adaptive,
approach oriented correlates of belief in a just world for the self: A review of the research”. Personality and Individual Differences, 151, 109485.

2. Decety J, & Yoder, K.J. (2017). “The emerging social neuroscience of justice motivation”. Trends in Cognitive Sciences, 21(1), 6–14.

3. Ellenbogen, G. (1986). Oral Sadism and the Vegetarian Personality. New York: Brunner/Mazel.

4. Furnham, A. (2023). “Life is not Fair: Get used to it! A Personal Perspective on Contemporary Social Justice Research”. Social Justice Research, 36, 293-304.

5. Hafer, C. L., & Bègue, L. (2005). “Experimental Research on Just-World Theory: Problems, Developments, and Future Challenges”. Psychological Bulletin, 131(1), 128–67.

The post Where’s Your Sense of Justice? appeared first on The European Business Review.

By Vladimir Spinko

While AI is increasingly deployed in humanitarian, security, and disaster-response domains, the real challenge lies not in detection accuracy but in moral decision thresholds. This article examines how probabilistic AI systems translate uncertainty into life-critical actions, exposing hidden biases, accountability gaps, and the necessity of human oversight in high-risk environments.

Currently, most drone systems, whether used in humanitarian demining, disaster mapping or security surveillance, act primarily as monitoring tools. Their role is to gather sensor data (visual, thermal, radar, LiDAR, SAR, etc.) and present it to a human operator, who interprets the scene and makes decisions. The system’s value lies in extending human perception and reducing direct risk to operators; risk assessment, judgment, and decision-making remain human tasks.

AI systems deployed in high-risk humanitarian and security environments do not “know” that an area is safe. They operate on probabilistic inference. A drone-mounted ground-penetrating radar (GPR), thermal imager, or synthetic aperture radar (SAR) does not produce a binary output; it generates confidence intervals. A former minefield is not “clear”, it is classified as, for example, 98.2 % likely free of unexploded ordnance (UXO) based on sensor fusion and historical priors.

Yet, the ethical problem begins at the threshold: who decides whether 99 % confidence is sufficient, or whether 99.9 % is required? In humanitarian demining, the difference between these two numbers is not philosophical; it is operational. At 99 % confidence, one out of every 100 “cleared” zones may still contain a lethal device. At 99.9 %, that drops to one in 1,000 but the cost is non-linear. Survey time increases, sensor passes multiply, and operational budgets inflate rapidly.

The Black Box in the Field: Demining is context-dependent

The boundary between passive monitoring and autonomous action is increasingly blurred in security and demining operations. Traditional drone systems collect sensor data (visual, thermal, radar, LiDAR, SAR) for human operators to interpret, extending perception and reducing direct risk. Emerging applications, however, are moving toward systems that not only detect threats but reason about them and initiate action.

In security contexts, this shift is already apparent. In early November 2025, unauthorized drone incursions over European airspace forced temporary closures of Brussels and Liège airports, leading to dozens of cancelled or diverted flights and hundreds of stranded passengers. These incidents illustrate how sensor data can quickly escalate into high-stakes operational decisions, including airspace shutdowns, flight diversions, and emergency deployment of security personnel. In future deployments, AI may be tasked with evaluating whether a drone is hostile and determining the optimal response, effectively performing real-time risk assessment and action selection.

A similar evolution can be envisioned in demining. AI-enabled systems might integrate radar signatures, terrain models, and historical minefield data to compute probabilities that a given route contains unexploded ordnance. Based on these calculations, the system could recommend rerouting or flag high-risk zones, translating probabilistic assessments into operational decisions. In both domains, this represents a move from “what is” (detection of an object or anomaly) to “what should be done,” embedding normative judgments within machine reasoning.

Who Takes the Blame When AI Gets It Wrong And What Gets Lost When We Rush?

AI systems in high-stakes humanitarian contexts face a structural challenge: reproducing human decision-making where risk is non-linear and outcomes are irreversible. Human operators in demining, air traffic control, or evacuation coordination rely on tacit knowledge, pattern recognition, heuristics, and situational ethics. Two experienced deminers may assess the same terrain differently, and both outcomes can be operationally “successful,” yet these cannot be directly encoded as ground truth for AI.

Humanitarian demining and civil aviation, though working in very different environments, both rely on exceptionally detailed global standards designed to manage extreme, life-critical risks. These protocols – from step-by-step clearance procedures to tightly regulated maintenance and verification routines – exist precisely because even the smallest oversight can have catastrophic consequences. Yet history shows that even in the most regulated, checklist-driven industries, the probability of error is never zero. Conditions shift, edge cases emerge, and humans adapt in ways no guideline can fully capture.

In less regulated domains such as disaster relief, the uncertainty becomes even more acute. There are no globally standardized guidelines, decisions must be made within minutes, and information arrives incomplete or distorted. Drones play a crucial role in rapid damage assessment and victim search. Still, the cost of error is high: a misread thermal signature or an incorrectly flagged “safe” corridor can redirect rescuers away from those who need help most. In the chaos of an unfolding emergency, even a subtle algorithmic bias can escalate into a life-critical failure.

This creates a critical risk of bias in training data. Systems trained on historical minefields – for example, ordnance from past European conflicts – may miss improvised or novel devices in new theaters. AI that performs well on familiar terrain can become dangerously overconfident elsewhere. Auditing such hidden biases requires both technical validation against diverse datasets and contextual review by experienced operators.

The problem is amplified when decisions involve value trade-offs, such as exposing one operator to protect many civilians or delaying action to gather more data. Models that reduce these judgments to single metrics can obscure moral and operational complexity. The key question remains: how do we audit for hidden bias and ensure AI outputs are interpreted with human judgment, especially when the system’s confidence may give a false sense of certainty?

Human-in-the-Loop vs. Human-on-the-Loop: Ethical Oversight in Life-Critical AI

AI and automated systems face a unique trust dynamic: when a robot or algorithm errs, the perceived penalty is higher than for an equivalent human error. This phenomenon, known as algorithm aversion, has been documented in aviation and automation research, where a single automation failure reduces operator trust more sharply than a comparable human mistake. Even statistically sound AI recommendations may be questioned or rejected because the error seems opaque or the rationale is difficult to interpret.

From a moral and engineering standpoint, this raises the question of how humans should be integrated into decision loops. Should operators remain fully “in the loop,” approving every AI-generated action, or is it acceptable for them to be merely “on the loop,” monitoring decisions without direct intervention? In life-or-death safety contexts — whether clearing minefields, controlling air traffic, or directing emergency responses — maintaining a human “in the loop” is arguably ethically mandatory to ensure accountability and prevent catastrophic outcomes.

The broader concern is a slippery slope: today it is demining, tomorrow it could be AI assessing structural integrity after earthquakes, or planning evacuation routes during wildfires. Designing these systems requires embedding core ethical principles from the outset – including transparency, explainability, and explicit human oversight to prevent misuse or unintended harm. Without such safeguards, even highly accurate systems risk eroding trust and producing errors with consequences far beyond what their statistical performance might suggest.

From Mortal Consequences to Asset Loss: AI Risk Across Domains

There is a fundamental difference between systems used in life-critical domains and those used in security or interdiction tasks. In demining or air traffic control, a single error can directly translate into human death or serious injury. A false “safe” decision is irreversible. In these contexts, acceptable error rates approach zero, and every design trade-off is implicitly a moral decision about how much human risk can be tolerated.

The “hostile drone” problem operates under a different cost structure. If an innocent drone is misclassified and destroyed, the outcome is usually a financial loss – a $500-$2,000 asset written off not a human casualty. That asymmetry changes how risk is framed: systems are allowed to be more aggressive because the downside of error is economically acceptable when weighed against the potential threat to civilian aircraft. Treating both domains as equivalent hides this reality and produces dangerously misleading safety assumptions.

Decision-Making AI in Agriculture: Benefits and Minimal Consequences

Smart or precision agriculture illustrates a very different ethical and operational landscape. Unlike life-critical systems, AI here is often tasked not only with monitoring but also with decision-making, such as targeted fertilization, irrigation, or pest control. The advantage is clear: robots can optimize input use, reduce waste, and adjust treatments with high spatial precision, improving efficiency and crop yield.

However, the stakes of error are low. A misapplied fertilizer or missed weed patch rarely causes irreversible harm: the cost is usually economic or environmental, not human. Moreover, these systems operate in relatively well-understood domains with few input dimensions (soil moisture, nutrient levels, weather), and training paths are straightforward and highly supervised. In other words, precision agriculture AI is almost a “toy problem” compared with humanitarian or aviation applications: the margin for error is large, consequences are reversible, and the path from training data to safe deployment is relatively obvious.

About the Author

Vladimir Spinko is the founder of Aery Bizkaia, a deep-tech startup developing AI- powered CSAR radar systems for autonomous landmine detection. A graduate of MIPT and former COO at Aeroxo, he combines advanced physics, aerospace innovation, and humanitarian impact to redefine post-conflict safety.

The post Moral Engineering: When AI Decides Where It’s Safe to Walk appeared first on The European Business Review.

By Mostafa Sayyadi and Michael J. Provitera

When the AI train pulls in to the platform, the accompanying steam clouds of uncertainty may disorientate those waiting in the station. Here, Mostafa Sayyadi and Michael J. Provitera suggest that authenticity and psychological capital are key concepts in the success, or otherwise, of leadership in restoring clarity and confidence among the workforce.

Artificial intelligence is bringing new changes in the future of business.^1,2,3,4 Authentic leaders are those executives who can effectively guide their organizations through these tough transitions. AI has the potential to improve human skills. However, it also worries employees. Employees may fear that AI will take their jobs. Authentic leaders have an important duty now. They can introduce AI ethically and thoughtfully to balance the path forward. These leaders are very optimistic about AI’s potential to aid humans. They are also very realistic about employees’ concerns. With open discussions, authentic leaders will ease uncertainty about AI. These leaders explain how AI can work with employees, not against them. They also focus on ethics and people, not just efficiency. Adapting to change is hard. Nevertheless, an organization can thrive in the digital future with authentic leadership focused on empowering people.

Authentic leaders persevere in finding ethical AI approaches, choosing human values over convenience.

Moreover, authentic leaders inspire trust to guide transitions. Their motivation and belief in people’s abilities provide reassurance despite uncertainty. Authentic leaders persevere in finding ethical AI approaches, choosing human values over convenience. These leaders also show flexibility in readying their workforce to use AI responsibly. Psychological strengths like hope and resilience help authentic leaders manage AI’s risks. ^5,6 With an ethical digital culture focused on human collaboration with AI, authentic leaders can steer their companies through complex changes. Employees will, then, feel excited by AI’s potential, not threatened.

Digitalization, AI Data Reliance, and the Critical Role of Authentic Leadership

Digitalization brings many changes, from remote work and skills gaps to complex, matrixed organizations that present leaders with daunting challenges when modeling desired behaviors such as transparency and morality. To battle these challenges, executives need to adopt authentic leadership mindsets to help their companies in the direction of digital transformation. Authentic leaders can make people feel more confident in their ability to guide the organization through big, complex changes due to new technologies like artificial intelligence. Their self-confidence and related motivation help give reassurance and make people feel less uncertain, even when things feel unclear or worrying because of the changes, managing transitions capably. They can also reassure people amid uncertainty by openly displaying their drive, motivation, and leadership capability through their words and actions.

In addition, authentic leaders are aware of the impact on values of AI’s reliance on data. This reliance may compromise traditional values like transparency and morality, leading to leaders who rely more heavily on algorithmic insights than on their human reasoning capability and judgment learned over years of experience.^7,8 As pressures to rely solely on data increase, authentic leaders who excel in psychological capital elements such as hope can identify alternative ethical AI approaches that respect transparency and human impacts. Authentic leaders aspire to ethical methods over easy shortcuts that could compromise values. These leaders seek hope over convenience when faced with tough situations.

Machine Learning, AI Opacity, and the Critical Role of Authentic Leadership

Executives who adopt an authentic leadership style know how to deal with the impacts of machine learning and AI opacity. AI systems tend to be inherently opaque, concealing their inner workings from users and powered by proprietary black boxes. This lack of transparency contradicts authentic leaders’ emphasis on openness and transparency. Authentic leaders prioritize open dialogue when making and explaining decisions. AI systems make it impossible to explain AI-generated recommendations or insights. This can lead to distrust and anxiety among employees affected by mysterious AI systems. Employees may worry that AI could be biased and unethical, leading to unethical uses that go undetected and unchecked by leaders who cannot monitor audit algorithms to guarantee their moral behavior.

Authentic leaders act to mitigate any gaps between opaque AI systems and their values of openness.^9,10 These leaders also take proactive steps (e.g., ethics reviews, algorithm audits, or explainable AI techniques) to restore transparency and build trust against this artificial opacity created by systems that mismatch these values. Otherwise, the result may be distrust among users.

However, a key question remains. What can help authentic leaders manage opaque AI systems? Resilience is an interesting part of psychological capital. Psychological capital is a new theory in the area of motivation. Positive organizational behavior focuses on developing the follower or employee to become all they can become by setting stretch goals. These goals could be quantum leaps for the organization and employees. When employees reach their full potential, their performance increases, along with their well-being. Psychological capital is a combination of creating an organization that has high levels of each resource coupled with organizational capital, human capital, and social capital, which are intangible features of organizations that may improve not only competitive advantage but also profitability.

Recent research shows that resilience helps authentic leaders adapt to changes from opaque technologies like AI.¹¹ Resilience improves these leaders’ ability to recover from problems and introduce algorithm auditing to restore transparency. Authentic leaders who adapt well to change show flexibility in the face of AI disruption by proactively planning training to develop responsible AI skills in their workforce. From healthcare research, it emerges that adaptability empowers authentic leaders high in resilience to put in place ethical checks on black-box algorithms and find new ways to maintain transparency when faced with opaque AI and machine learning systems.

Organizational Trust, Ethical Digital Culture, and the Critical Role of Authentic Leadership 

Authentic leaders foster organizational trust in AI. Since employees fear job losses due to automation and AI, authentic leaders proactively build employee trust by communicating openly and transparently about how AI will augment roles rather than replace jobs.¹² Authentic leaders also strike the right tone when discussing how AI and technology will impact jobs. They are very realistic. AI will transform roles and potentially replace some jobs. Authentic leaders transparently acknowledge this fact while providing reassurance and optimism and focusing on how AI can augment human skills and talents. Technology has historically created more opportunities than it destroys, and AI can significantly boost human productivity.  This balanced, hopeful realism can ease fears of change. Authentic leaders can build trust through various means. Their self-assurance allows them to explain openly how AI enhances human skills, while their motivation helps workers believe they can succeed with AI’s help, prioritizing human skills. Authentic leaders can effectively design systems that enable teamwork between humans and AI and foster trust. Their vision for employees can also provide reassurance against fears of replacement. Authentic leaders use self-belief to openly discuss this idea while confidently conveying how AI enhances human skills.

Another key point for executives is that the era of AI also promotes new models of ethical use of technology and shapes a new model of corporate culture in which employees should be aware that AI can assist humans and not replace them. Here, fostering an ethical digital culture is critical. As AI becomes more integrated, authentic leaders vocally and visibly promote responsible and ethical use of the technology. These leaders make it clear that AI is meant to enhance, not diminish, uniquely human abilities like creativity, empathy, and judgment. Authentic leaders demonstrate ethics to build employee trust in AI. They create an ethical organizational culture where AI assists humans rather than replacing them. Their optimistic approach includes monitoring the ethical aspects of AI while keeping its focus on helping humans. These actions contribute to creating an ethical climate while shaping a culture where opportunities for human enhancement arise.

AI Assessment, Data-Driven, People-Centric Metrics, and the Critical Role of Authentic Leadership 

Authentic leaders can also answer a key question: Does the assessment of AI impact people’s oversight? Every executive should be aware that, as any company or organization considers investing in new technology like robots or advanced computer programs, its leaders often start with an assessment, including financial, work process, and organizational considerations. But authentic leaders completely understand that it’s about more than numbers. They spend time considering how these significant changes might impact the people who work there through factors like job security and well-being. In particular, leaders need to ask key questions regarding any proposed changes. These key questions are: “Will these changes cause someone else’s job or career to change?” or “Who might find adapting difficult?” In addition, authentic leaders have an ethical responsibility when decisions could impact others. They consider this by providing extra training or other forms of support to employees who feel threatened by any forthcoming adjustments. These leaders will dig further to determine why, before devising strategies.

In addition, authentic leaders have an ethical responsibility to prioritize workplace humanity. They emphasize transparency, ethics, and morality to create trust when implementing AI or emerging technologies. Executives implementing AI must not accept data-driven metrics or efficiency gains alone as justification. This represents an ethical breach. They have a moral duty to consider how AI might subjugate human dignity or dehumanize aspects of work. If an AI system’s metrics will treat people like disposable cogs, then its implementation must be rejected on moral grounds. They must mitigate these risks by showing openness, carefully assessing impacts, and upholding an unwavering dedication to safeguarding people’s humanity. When integrating AI systems, authentic leaders communicate the purpose and limitations of these technologies and consider any risks that might occur, rather than dismiss them outright. They also guard against profit-driven attempts to turn work into mechanical, data-driven processes devoid of meaning. Authentic leaders prioritize respecting human dignity over productivity gains or cost savings. By doing this, these leaders in the digital era champion timeless human-centric leadership virtues such as morality, empathy, and ethical empowerment as an antidote against technology’s potentially dehumanizing effects. Accordingly, authentic leaders set an example for an ethical AI deployment that augments rather than diminishes workplace humanity.

Practical Guidance for Leading Through the AI Era 

The new changes as a result of AI are challenging for leaders across the globe. They can adopt an authentic leadership style to impact their subordinates. Employees can feel threatened that AI will take their jobs. Authentic leaders can communicate openly and honestly. They also need to explain how AI can help people do their jobs better and focus on more human activities like creativity and empathy. Authentic leaders can make sure that AI is used ethically. They can also highlight that AI makes processes more efficient. Here, authentic leaders also consider the human impacts. They frankly reject uses of AI that diminish human dignity or treat people like machines. They can assess the risks and communicate them. Therefore, these leaders emphasize AI supporting humans rather than replacing them.

The next key point is that authentic leaders reinforce the culture or the organization by providing extra support and training to help workers adapt. In doing this, they may consider the following recommendations:

Stay optimistic and focus on how AI can enhance human skills. Be open and have ongoing dialogues with workers about impacts. Provide extra training and support to help them adapt.

Implement AI carefully and ethically. Before deploying it, do complete assessments on how it will affect people and jobs. Reject uses that could diminish human dignity. Make ethical oversight of AI a visible priority.

Keep communicating with authentic transparency. Explain the purpose and limitations of AI. Be realistic yet hopeful about how roles will transform. Reassure people that new tech will augment, not replace, jobs.

Keep people at the center.

Shape an ethical climate of learning and trust. Adopt AI as a collaborative tool to expand what humans can achieve.

Practical Guidance for Developing Psychological Capital 

In this section, we present recommendations for executives to develop psychological capital coupled with their authentic leadership. With AI so prevalent, hope is important, and bouncing back from setbacks is equally important. Self-efficacy to deal with situations needs a transfer of talent when necessary. Self-efficacy is people’s belief in their capacity to influence events that may affect their lives. In our conversations with Australian executives in Melbourne, Sydney, and Perth, we found that the following tenets of psychological capital can strengthen authentic leaders as they manage change and encourage a culture of humans and artificial intelligence with employees. Based on our findings, we present the following practical ideas for authentic leaders:

• Hope – Use hope to provide training for the visualization of quantum goals and contingency planning. Have leaders and followers practice flexibility in finding new solutions by providing hope coupled with resources and tolerance for possible mistakes when they occur.
• Resilience – Use resilience to build high recovery from artificial intelligence drawbacks such as cyberattacks. Resilience can be manifested through workshops on managing stress, bouncing back from setbacks, and changing management skills to repackage negative stimuli.
• Self-efficacy – Use self-efficacy to boost confidence by setting achievable targets that stretch skill levels. Provide mentoring from senior and tenured employees to those recently onboarded, and give positive feedback on accomplishments whenever possible. We found that cross-training in similar areas of the business units helps people grow in depth and breadth.
• Optimism – Use optimism to foster techniques such as identifying negative thought patterns and changing them to positive ones, reframing the issues positively, and focusing on opportunities when they arise.
• Transparency – Use transparency to enhance education and communication. Transparency needs to be coupled with clear communication of plans in an ongoing process, always inviting input and sharing from and across employees.

In Conclusion

By keeping people at the center, authentic leaders are those executives who can effectively and ethically integrate AI to elevate rather than diminish productivity and humanity. These leaders can guide their organizations through the digital transitions today. In addition, by empowering the elements of psychological capital, authentic leaders can enhance the work environment and more effectively open up opportunities to expand and grow organizations in the AI age. Once workers are aware of the power of AI coupled with authentic leadership and positive organizational behavior, better known as psychological capital, they become more innovative and creative. Effective authentic leadership will also provide a supportive digital culture to help employees feel empowered and not threatened by AI. This can help employees embrace all the dynamic decisions that follow an artificial intelligence mindset.

About the Authors

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies – from start-ups to the Fortune 100 – succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in top-flight publications.

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. He is quoted frequently in the national media.

References

1. Sheikh, H., Prins, C., & Schrijvers, E. (2023). “AI as a System Technology”. In H. Sheikh, C. Prins & E. Schrijvers (Eds.), Mission AI. Research for Policy. Springer. https://doi.org/10.1007/978-3-031-21448-6_4

2. Campos Zabala, F.J. (2023). “Future Trends in AI and Its Considerations for Business”. In F.J. Campos Zabala (Eds.), Grow Your Business with AI. Apress. https://doi.org/10.1007/978-1-4842-9669-1_23

3. Sheikh, H., Prins, C., Schrijvers, E. (2023). “Policy for AI as a System Technology”. In H. Sheikh, C. Prins & E. Schrijvers (Eds.), Mission AI. Research for Policy. Springer. https://doi.org/10.1007/978-3-031-21448-6_10

4. Hirsch-Kreinsen, H. (2023). “Artificial intelligence: a ‘promising technology’”. AI and Society, 1-12. https://doi.org/10.1007/s00146-023-01629-w

5. Kelly, L. (2023). Introduction. In L. Kelly (Eds.), Mindfulness for Authentic Leadership. Palgrave Studies in Workplace Spirituality and Fulfillment. Palgrave Macmillan. https://doi.org/10.1007/978-3-031-34677-4_1

6. Fateh, A., Mustamil, N., & Shahzad, F. (2021). “Role of authentic leadership and personal mastery in predicting employee creative behavior: a self-determination perspective”. Frontiers of Business Research in China, 15(1), 1-16. https://doi.org/10.1186/s11782-021-00100-1

7. Zhao, J., & Gómez Fariñas, B. (2023). “Artificial Intelligence and Sustainable Decisions”. European Business Organization Law Review, 24(1), 1–39. https://doi.org/10.1007/s40804-022-00262-2

8. Bonicalzi, S., De Caro, M., & Giovanola, B. (2023). “Artificial Intelligence and Autonomy: On the Ethical Dimension of Recommender Systems”. Topoi, 42(3), 819–32. https://doi.org/10.1007/s11245-023-09922-5

9. Felzmann, H., Fosch-Villaronga, E., Lutz, C., Tamò-Larrieux, A. (2023). “Towards Transparency by Design for Artificial Intelligence”. Science and Engineering Ethics, 26 (2), 3333–61. https://doi.org/10.1007/s11948-020-00276-4

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11. Pitman, T. & Reilly, J.E. (2023). “The Challenge to Establish Authentic Leadership in the Digital Age”. In: Turcan, R.V., Reilly, J.E., Jørgensen, K.M. & Taran, Y. and Bujac, A.I. (eds) The Emerald Handbook of Authentic Leadership, Emerald Publishing Limited, Leeds. https://doi.org/10.1108/978-1-80262-013-920231021

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The post Authentic Leadership Shifts in the AI Age appeared first on The European Business Review.

This article delves into the effect that Corporate Social Responsibility (CSR) has on recruiting and retaining Generation Z (Generation Z) employees. It takes a two-pronged approach, using existing literature and new, primary data to paint a fuller picture. The study shows the significance of CSR, diversity, flexibility, and benefits in crafting good recruitment strategies. However, CSR and its correlations are even more important regarding retention. The study underlines findings about the correlation between CSR and retention. It gives recommendations concerning factors that future surveys can connect to delve even further into understanding the importance of CSR and other important aspects for Generation Z in the recruitment process.

Introduction

Born between 1995 and 2010, some people belonging to Generation Z already entered the workforce. This age group seems to behave differently than the preceding ones as they have distinct expectations that have been shaped by the rapid technological advancements of the last few decades and the global socioeconomic challenges (Benitez-Marquez et al., 2022). While we know that all recruits have different preferences, this generation is particularly distinguished by the fact that it is different from the previous one in both what it demands at the time of recruitment and what it demands for the future to feel valued and willing to stay long-term in a company.

Employers need to pay attention to the up-and-coming class of recruits called Generation Z as their interests differ from what they are accustomed to. This article will not only focus on the unique characteristics of Generation Z and what the literature has already found out. It will also explore through a study conducted by the author how Generation Z’s views on employers and its decision to retain a job are impacted by CSR, diversity, employment benefits, and flexibility. Lastly, the article will conclude what actions the employers must take to generate a successful recruiting and retention strategy.

Literature Review of CSR

To generate a deeper understanding of how CSR is shaping the recruitment of Generation Z, one must first understand what CSR even is.

To explain CSR, Carroll categorizes CSR into five key areas (Carroll, 1991).

First: Environmental Sustainability: Efforts to minimize environmental harm, like reducing carbon footprints and implementing eco-friendly solutions for the future.

Second: Social responsibility includes fair wages, workplace safety, general employee well-being, and overall established occupational health management.

Third: Ethical Business Practices: Transparency, fairness, and respect for human rights.

Fourth: Community Engagement: Supporting local initiatives through volunteering and partnerships.

Fifth: Economic Responsibility: Balancing profitability with sustainable growth and transparent governance.

To sum it up, CSR is not just an acronym for Corporate Social Responsibility, it is about organizations taking responsibility in various categories and giving a commitment that their operations are following strict ethical standards now and in the future.

Implications of CSR for Generation Z  

Studies reveal that Generation Z prioritizes workplaces that align with their values, particularly in areas of CSR, diversity, and flexibility.

According to McKinsey & Company (2022), Generation Z seeks purpose-driven careers where ethical practices and sustainability are integral. Research also suggests that organizations failing to address these expectations risk losing talent to competitors that better reflect Generation Z’s ideals. (Seemiller & Grace, 2016). The American

Psychological Association (2021) states that 46% of Generation Z adolescents age group see mental health and mental health implications as a major factor in their career choices and future decisions in general.  Furthermore, McKinsey & Company (2022) found that for Generation Z a job is not only a way to earn money, but much rather a way to live out their values and beliefs. Social and environmental engagements of companies are also integral factors for the job selection for Generation Z, as they are also part of the very important factor being CSR (McKinsey & Company, 2022; Deloitte, 2024).

Research Questions

The article centers on three distinct research questions. The primary one that was already discussed, is: What effect does CSR have on how Generation Z views potential employers? The author was primarily concerned with the perspective of the potential employee.

The second question is: What influence do factors like diversity, benefits, and flexibility have on Generation Z’s retention? This is focused more on the employee and retention than on the employer hiring process.

The last question is: To what extent can CSR create long-term loyalty for the employer? This part is again mainly focused on the actual employee’s perspective and loyalty to the employer.

The second and third questions will focus on the upcoming analysis of the study that was conducted by the author.

Methodology

This study adopted a quantitative research method, utilizing a survey instrument with 50 respondents 18-28 years of age. The survey gathered data on the following topics: First the importance of CSR in choosing a job, recruits’ reasons for preferring certain employers, and general impressions of employers in the light of their CSR practices. Second the importance of various traits of the employing company (including diversity, equity, and flexibility) on the choice of the employer and impressions of how responsible the employer or rather the employing company behaves. Third, the retention-related factors that make respondents feel good about staying with a company and consider it responsible (e.g., career growth, corporate values).

Results and Analysis

Key Findings

• CSR: seventy-six percent rated CSR as “extremely important” (mean = 4.72), correlating strongly with career growth (eighty percent), corporate values (seventy- six percent), and flexible work options (seventy percent).
• Diversity: Seventy percent viewed diversity as “extremely significant” (mean = 4.66), and they preferred inclusive work environments.
• Benefits: Eighty percent found benefits “extremely important” (mean = 4.8), making this the strongest predictor of retention.
• Flexibility: seventy-six percent rated flexibility as “extremely important” (mean = 4.72).

Cross-Tabulation Analysis: CSR and Retention Factors

Among respondents who rated CSR as “extremely important,” eighty percent valued career growth, seventy-six percent prioritized strong corporate values, and seventy percent emphasized flexible work options. These results show a strong link between CSR and other factors concerning retention. It shows how organizations, which are focusing on CSR can strengthen the long-term loyalty of employees.

Figure 1: Correlation Between CSR and Retention Factors (creation of the author)

Chi-Square Test: Diversity and Work Model Preferences

A Chi-square test revealed a significant association between diversity and the preferred work models (χ² = 8.13, p < 0.05). People who were prioritizing diversity were also much likelier to show a preference for hybrid or remote work models. This shows Generation Z’s preference for flexible and inclusive workplaces.

Regression Analysis: Influence on Retention Factors

Regression analysis demonstrates the influence of CSR, diversity, benefits, and flexibility on retention preferences. Benefits showed the strongest impact on the retention of Generation Z in this survey (β = 0.34, p < 0.01), this was followed by CSR (β = 0.32, p < 0.01), diversity (β = 0.29, p < 0.05), and lastly, flexibility which is still significant to the 0.05 level (β = 0.28, p < 0.05).

Figure 2: Regression Analysis of Retention Factors (creation of the author)

Discussion

Overall, these findings underline the importance of the different factors established in this paper (being: benefits, CSR, diversity, and flexibility) for recruitment and retention strategies of Generation Z. Employers have the task of balancing these modern priorities with traditional factors like salary and career growth. If they can successfully level these things, they are much more likely to attract, recruit, and retain Generation Z talent effectively. To fix a problem like job-hopping Zahari & Puteh (2023) suggest flexible work arrangements and opportunities for personal development. Through this strategy, the extreme fluctuation of talent can be mitigated a bit (Zahari & Puteh, 2023).

In addition, organizations that implement CSR efficiently, have a factor on their side that can lead to a differentiation from the competitors in the hard-fought job market. On the one hand, the launch of campaigns in these areas may initially lead to additional costs. On the other hand, the display of a commitment to factors such as sustainability, ethical practices, and community engagement, can often improve the general reputation of companies in the eyes of the younger generations such as Generation Z, and may lead to a deeper connection with Generation Z’s values, which leads to an improved will to work for this company. It may also foster long-term loyalty and satisfaction, which justifies the additional investment in the implementation costs. Change et al. (2024) also underline this development by stating that companies that are prioritizing ethical and sustainable practices are generally positioned better for the future to prosper in the always-changing job market (Chang et al., 2024).

Limitations

Even though the study provides some interesting insights, there are also some noticeable limitations. Firstly, one must mention the small sample size with only 50 people responding to the questionnaire. Also, there was a narrow cultural scope, meaning that most respondents were of European descent. This limited the overall generalizability of the study. Therefore, a suggestion for future research would be to involve larger, more diverse populations to be able to explore, compare, and have an analysis, of the different cultural variations in recruitment preferences of Generation Z. A final validation of the results that can also deepen the insights, could be given through longitudinal studies and other qualitative methods such as expert interviews with Generation Z. Also, the ability to have an understanding of the shared values between generations such as Gen X, Gen Y, and Generation Z, could give an insight into the upand-coming workforce dynamics.

Conclusion and Outlook

To give a conclusion one can say, that to maintain and attract Generation Z, companies have to evolve their recruitment efforts and integrate CSR, benefits, diversity, and flexibility. These factors are especially important in the eyes of employees when choosing a company to work for. If organizations can align these modern values with some of the traditional ones such as career opportunities or the height of the salary, they can create a strong reason for Generation Z to consider them. If these values are being met also play a huge role in employee retention and loyalty for the future.

Investments in ethics and sustainability not only position the company better in the changing job markets but also play a role in fostering the business economically for the upcoming years. Data analytics can help to identify trends that are interesting for Generation Z. Generally, companies must try to stay on top of the dynamically changing demands of the younger generations to present them with attractive work offers.

References

1. American Psychological Association. (2021). Stress in America 2021: A national mental health crisis. Retrieved from https://www.apa.org

2. Benitez-Marquez, J., Smith, A., & Johnson, R. (2022). CSR and Employee: A Generational Perspective. Journal of Business Ethics, 45(3), 215-230.

2. Carroll, A. B. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral  Management of Organizational Stakeholders. Business Horizons, 34(4), 39-48.

3. Chang, W., et al. (2024). Recruitment Strategies for a Digital Workforce. Harvard Business Review.

4. McKinsey & Company. (2022). Gen Z and the Future of Work.                           

5. Zahari, I. & Puteh, F. (2023). Employee Retention in the Post-Pandemic Era.       International Journal of Human Resource Studies, 11(2), 134-150.

6. Seemiller, C., & Grace, M. (2016). Generation Z Goes to College. Wiley.

7. Deloitte. (2024). The Future of Work: Insights for Employers. Deloitte Insights.

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What Is CSR and Why It Matters?

Corporate Social Responsibility is a business model that enables organizations to be accountable for their social, economic, and environmental impact. With consumers becoming more conscious about sustainability, companies must demonstrate their commitment to societal well-being. Whether through reducing carbon footprints or engaging in philanthropy, CSR is now a vital component of corporate strategy.

Consumers and stakeholders alike are holding businesses to higher ethical standards. As a result, companies that fail to align their practices with socially responsible ideals risk falling behind competitors. According to SunriseGeek, 71% of Millennials and 67% of Gen Z prioritize sustainability when making purchase decisions. This trend underscores why CSR has become essential for brand loyalty and long-term growth.

Why Are Companies Adopting CSR?

CSR offers numerous advantages beyond public perception. Here’s why companies are embracing these practices:

1. Enhanced Brand Image: Companies involved in CSR initiatives strengthen their relationship with consumers. For instance, when a business donates to social causes, it signals to customers that it values more than just profits.
2. Increased Profitability: Socially responsible companies tend to have more loyal customers who are willing to pay a premium for their products.
3. Tax Incentives: Charitable contributions can lead to significant tax deductions, motivating companies to invest in CSR.
4. Political Influence: Some businesses leverage their CSR efforts to gain the attention of influential policymakers, helping them shape regulations favorable to their industry.
5. Employee Engagement: CSR fosters a positive work environment. Employees feel prouder of companies that care about more than just financial performance, which can enhance retention and productivity.
6. Attracting Top Talent: Younger generations increasingly prioritize working for companies that align with their values. A strong CSR program can be a powerful recruitment tool.
7. Crisis Management: CSR can also help businesses mitigate potential reputational risks during crises by demonstrating a genuine commitment to solving societal issues.

Spotlight on 15 Socially Responsible Companies

SunriseGeek recently featured a list of 15 companies excelling in CSR in 2024. From environmental sustainability to ethical labor practices, these organizations are making meaningful contributions. Here are some highlights:

1. Ben & Jerry’s: Known for its activism on social issues like climate change and refugee rights, Ben & Jerry’s consistently demonstrates its commitment to social good by partnering with nonprofits and donating to various causes.
2. Patagonia: This outdoor apparel brand is an environmental pioneer. Its “Worn Wear” initiative encourages customers to return used clothing for refurbishment, reducing waste and promoting sustainability.
3. Google: Beyond its green energy initiatives, Google is an advocate for responsible AI development. CEO Sundar Pichai frequently speaks on ethical technology and its role in society.
4. Ikea: Ikea aims to use 100% sustainable materials in its products by 2030 and actively supports employment and entrepreneurship programs globally.
5. Lego: Committed to sustainability, Lego is working toward making its packaging and products fully sustainable by 2025.

To read about all 15 companies making a difference, visit the full article on SunriseGeek.

The Future of CSR

As we look toward the future, it’s clear that CSR will continue to evolve. With rising environmental concerns and a growing emphasis on diversity, equity, and inclusion, businesses must continuously adapt their CSR strategies. Sustainable innovation and responsible leadership will be the hallmarks of successful companies in the coming decade.

If your company hasn’t started implementing CSR, now is the time. From reducing environmental impact to supporting local communities, businesses that prioritize CSR can not only improve their bottom line but also contribute to a more equitable and sustainable future.

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These days you can’t go to any website without being confronted by their social impact standing. Companies nowadays are not only wildly encouraged to take part in various social issues, but also have most of them in writing for the company’s policy. It’s a way for them to stay involved in the community while also making sure the work they do is being utilized for the greater good of society like through Ecovadis sustainability reports.

Today’s companies are more than just expected to care about making the world a better place for their employees and their employee’s families. They’re expected to serve their communities, listen to their customers, take public stances and action on important issues, value and support employees, work for sustainability, and respond to current events. Corporate social responsibility – or CSR – makes this easier.

You can think of CSR as a self-regulating business model. It aids companies in being socially accountable to itself, its stakeholders, and the general public. The causes they champion can range from climate change, social responsibility, community impaction, charity work, or anything that offers external positive impact. CSR was previously used more to impress shareholders exclusively, but in recent years has become a major selling point for employees, prospective employees, and both existing and potential customers.

With 52% of millennials wanting to buy from brands whose values align with their personal values, it’s a no brainer to have a CSR policy in place. Then comes the hard part – evaluating them.Typically, the best way to keep track and measure your CSR efforts is to consider ESG (Environment, Social, and Governance). These three tangible objective metrics represent a triple bottom line that corporations use in self evaluation. Investors and consumers can also use these figures to measure a company’s impact.

Let’s take a look at them one by one.

Environmental

When someone hears the word environmental, their mind often goes straight to “sustainability”. They wouldn’t be wrong in this case. But for mega corporations with an ethical responsibility to give back, companies should evaluate their environmental impact and consider whether they are negatively impacting or polluting the planet. Corporate social responsibility is rooted in preserving the environment. A company can pursue environmental stewardship by reducing pollution and emissions in manufacturing, recycling materials, replenishing natural resources like trees, or creating product lines consistent with CSR. This is typically done by taking a more comprehensive look through their supply train, their product delivery system, or the product itself. If a company concludes that they are producing negative impacts on the environment, they must take action to mitigate or remedy said impacts.

Social

The “S” in CSR stands for “social”, meaning how just and fair companies compensate its employees. Companies shouldn’t just pay their workers a reasonable equitable wage, but offer ways to make a positive impact on their wider community. It requires a company to contribute to society, whether a company donates profit to charities, enters into transactions only with suppliers or vendors that align with the company philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.This could be through charitable donations, community service, or any other myriad of opportunities. Measuring this is usually done by looking at impact reports or deploying feedback forms.

Governance

Governance refers to internal management. It asks that companies have appropriate incentives for management, as well as processes in place to assure that the stakeholders of the company are well respected and represented fairly and equitably during business meetings, decisions and processes. It also includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation, favorable pay and benefits for employees, vendor use across demographics, full disclosures, and transparency for investors. This can usually be measured by drawing up transparency reports and having annual reviews of different leadership practices in place at a company.

Companies looking to measure its success beyond the bottom line results can adapt CSR strategies that extends beyond the products they sell. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them, and there’s never any harm in that.

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The harshest criticism of corporate social responsibility is that companies are essentially immoral, or rather amoral. It’s said that money trumps everything, and that ethical behavior will always surrender—or simply be ignored—in the eternal quest for wealth. As the Spanish and Portuguese conquistadors pillaged and destroyed in the name of gold (and God), so too will companies chase profits no matter the consequences. Critics say that it’s in their DNA. Pollution, industrial accidents, obesity, low wages, global warming, and other misfortunes that may result are just collateral damage. The charge is that companies may – at least most of the time — observe the letter of the law, but not the spirit of the law. My experience is that that’s an accurate description of the tobacco industry. But what about other, more legitimate industries? Are they inherently amoral? What about the giant gas and oil companies, which are often attacked for rapaciousness? There’s certainly cause for criticism.

The 2010 BP oil spill in the Gulf of Mexico was the largest marine oil crisis and one of the largest environmental disasters in American history. The oil discharge, estimated to total about 5 million barrels, created enormous damage to beaches, wetlands, fishing, tourism, and wildlife. A 2013 study reported that dolphins and other marine life were continuing to die in record numbers. BP pled guilty to manslaughter and other felonies, including lying to Congress. You can’t put a company in jail, but BP ended up paying more than $18 billion in fines and has so far spent more than $65 billion for cleanup, penalties, and other payments. Why did this happen? Was it avoidable? A US District court ruled that BP was primarily responsible because of its gross negligence and reckless conduct. A US government report identified defective cement on the well, with responsibility falling mostly to BP but also partly to the rig operator, Transocean, and the contractor, Halliburton. A White House commission blamed BP and its partners for cutting costs and for an inadequate safety system. It certainly seems that BP was putting profit above safety and social responsibility.

A well-publicized indictment of the oil and gas industry is Rachel Maddow’s 2019 book, Blowout: Corrupted Democracy, Rogue State Russia, and the Richest, Most Destructive Industry on Earth. Maddow, the MSNBC commentator whose progressive views are counterweights to Sean Hannity and others on Fox News, refers to the oil and gas industry as “Godzilla over downtown Tokyo” and says it is indeed amoral. When a lion kills a gazelle, says Maddow, “you really can’t blame the lion. It’s who she is; it’s in her nature.” Maddow charges that Big Oil and Gas have weakened democracies across the world, caused enormous environmental damage, and propped up Vladimir Putin (Maddow calls Russia a “second-rate, second-world piker”) and other authoritarian rulers. She cites Oklahoma as an example of public harm due to earthquakes caused by fracking (“frackquakes”). After years of enduring the problem, Oklahoma’s governor finally empowered a commission to order operators to shut down injection wells or prove they were not sending wastewater into basement rocks, where the added pressure could trigger earthquakes. Maddow focuses on BP, Chevron, and other big players, especially Exxon Mobil.

It’s hard to observe the BP oil spill or read about the excesses of the oil and gas companies without believing that the industry is causing worldwide problems and despoiling the planet. Exxon Mobil has also been criticized as a long-time leader in climate change denial, opposing regulations and funding academics and others to influence public opinion against the scientific evidence that global warming is caused in large part by the burning of fossil fuels. (More recently the company partly reversed course and supported a carbon tax and a gasoline tax.)

Action against the industry appears to be increasing. At the 2019 Harvard-Yale football game, climate change activists took the field at halftime to protest the universities’ investments in fossil fuel companies. Some five hundred people held their ground, and the game was delayed for more than an hour. More recently, Georgetown, the university where I teach, said it will divest from fossil fuel companies. One report said that the fossil fuel divestment movement is now global, with commitments from more than a thousand organizations and tens of thousands of individuals controlling over $8 trillion in combined assets.

What does responsible corporate behavior look like in light of the charges against this industry? Ed Maibach, who oversees the Center for Climate Change Communication at George Mason University, identifies the industry as part of the problem, to be sure, but believes they also must be a key part of the solution. He says we have to accelerate the transition to a clean energy economy (“100 percent clean energy for everything— heating, cooling, transportation, manufacturing”). He argues that we need carbon-capture technologies to put the heat-trapping pollution in our skies back into the ground. And he calls for “every community, state, and nation to prepare for the unavoidable impacts of climate change that are already happening.” While the energy industry should play a leading role in all this, Ed doubts that they will take the major steps that are needed. “Shell appears to be leaning into the challenge,” he observes, “but their vision for what can get done falls far short of what must get done.”

A senior executive at Exxon Mobil, now retired, has addressed my corporate social responsibility class on several occasions. The students were not always a friendly audience. One student challenged him about why Exxon Mobil was in Angola, with its corrupt government. He replied that his company operated throughout the world, where the oil is, and engaged with many governments. He said that Exxon Mobil was always careful to adhere to the US Foreign Corrupt Practices Act.

Rachel Maddow might not agree, but US companies do follow strict laws about avoiding corruption in other countries. And regarding energy sources, the Exxon executive presented the CSR class with a graph with Exxon Mobil’s 25-year projections of the world’s use of energy. It showed carbon-based fuels declining over time but still representing an important part of the world’s fuel supply for decades to come. “We can talk about electric cars,” he said, “but for now the auto industry is built around liquid fuels, and we have to bring new technologies along while still supporting a modern, vibrant economy.” His point was that his company was about energy, not fossil energy. It is therefore working on new sources and aiming toward a vision of worldwide clean energy as part of the solution.

Heather Kulp is one of the strongest proponents of corporate social responsibility I know. Now the manager of strategy and analytics for Chevron, Heather began her career with a strong belief in the power of non-government organizations (NGOs) to create social impact. She worked for an NGO called Search for Common Ground in Angola. Chevron was there working in oil extraction and engaged in what Heather saw was most important to local people—creating jobs. Her epiphany was that the private sector was critical for economic development. She decided to join Chevron, and when she did, “many of my NGO friends dumped me.” She became part of an internal consulting group within Chevron and went to several other African countries, working with her company’s business units on how to be more effective in “stakeholder and community engagement.” For a time, she managed the company’s Niger Delta Partnership Initiative. Heather learned how to make local partnerships into a competitive advantage for Chevron and “institutionalize it” within the company. Heather says, “Other companies were engaged in this, but we were always a leader. We did it the Chevron way: people, partnerships, process.”

After a few years, the company sent Heather on a six-month assignment to Richmond, California, where Chevron had a refinery. In this challenged community Kaiser Shipyards had once thrived, “but now there had been years of declining investment.” Heather stayed six years. She helped fund organizations working to resolve conflicts between youth gangs and the community at large. She was reminded of the child soldiers she had encountered in Sierra Leone. As Chevron invested in trying to solve the problem, Heather decided to turn the “philanthropic model into a community development model.” She found that she could take experiences from the developing world and apply them at home. Heather says that Chevron employees recognize the company’s social impact efforts and are proud to participate through volunteerism, matching donations for good causes, and employee networks, including Latino, women’s, and LGBTQ groups that provide scholarship funds and other community benefits. Heather started by picketing energy companies; today she sees herself as a champion of corporate responsibility for this generation. She says there’s no need for a person or group to be solely in charge of Chevron’s corporate responsibility because it’s “baked into the company.”

At this point, there’s not much agreement among the protagonists – social activists, investors, regulators and the oil and gas companies themselves about corporate social and environmental responsibility. Rachel Maddow says the sector is “Godzilla over downtown Tokyo.” Industry executives say they see the writing on the wall and are moving toward a safer world. Ed Maibach says they both have valid points, but the planet is burning, and the industry needs to be a big and immediate part of solving the problem. As for BP, the company that had the enormous oil spill, they now have a stated commitment to help the world achieve net zero emissions and for the company itself to achieve net zero by 2050 or sooner.

So, do companies have souls? Their people do, and their leaders must. Strong, ethical leadership is better leadership and results in smarter decisions for the company and its stakeholders as well as for society as a whole. Social responsibility is the right thing to do, and it is also the way to keep companies strong and society in good health.

This article was originally published on 23 February 2021.

About the Author

Bill Novelli, author of GOOD BUSINESS, has a distinguished career as a leader in the corporate and non-profit worlds. He was CEO of AARP, founder and president of the Campaign for Tobacco-Free Kids, EVP of CARE, and president of Porter Novelli, the global public relations agency. He began his career at Unilever and also was Director of Advertising & Creative Services at the Peace Corps. Today, Novelli is a professor in the McDonough School of Business at Georgetown University where he teaches in the MBA program, and also founded and oversees the Georgetown Business for Impact initiative. Novelli is co-chair of the Coalition to Transform Advanced Care, a national alliance to reform advanced illness/end of life care in the U.S, and serves on a number of other boards and committees. In addition to GOOD BUSINESS, Novelli is the author of Managing the Older Worker and Fifty Plus. He holds a B.A. and M.A. from the University of Pennsylvania. For more information, go to: http://billnovelli.com

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Value-driven leaders and people with means have an array of options for giving back to society. But whether through philanthropy, impact-driven investments, or responsible business stewardship, forward-thinking leaders have a common approach – that is, they seek to achieve their goals strategically.

Even with a significant budget, your resources are not unlimited. Thus, a strategic approach to allocating them can make all the difference.

Philanthropy – understanding the value of time and people

The value of €1 today will not be its value five years from now. So, when, how, and to whom you give can change outcomes for social justice, tackling the climate crisis, and your community.

A key question to answer is whether you want committed money to enable long-term funding or to be spent down. The endowment model was designed to provide foundations with perpetual funding; a large sum is set aside for investment, and the returns finance operations. However, the urgency of crises such as climate change has led to an increase in spend-down philanthropy, the notion that the value of money to address these crises is greater now than in the future. The Bill and Melinda Gates Foundation, for example, has committed to spending all its resources within 20 years of the founders’ deaths.

Where you give is also important to strategic giving. While effective management sounds like a no-brainer, classic metrics for the non-profit sector – such as low overhead – do not always signal effectiveness. They may come at the expense of an organisation’s ability to attract, develop, and retain talent. Effective altruism, a newer trend in giving metrics, emphasises the impact of an intervention for the amount spent (e.g., the number of lives saved from malaria relative to the purchase price of a malaria net). While impact measurement is important, not all types of changes can be quantified and attributed to a given intervention. For example, when a dictator is toppled, you will be hard-pressed to attribute this to the work of a single human rights organisation. Does that mean that advocacy work does not make a difference? Certainly not.

Lasting change also means considering who has a seat at the table in decision-making processes. People with lived experience of the problem and diverse perspectives are essential to sustainable solutions. So, too, are philanthropists who can inspire others. For example, because of The Giving Pledge – a campaign started by Warren Buffett, Melinda French Gates, and Bill Gates – billionaires around the world have publicly committed to giving the majority of their wealth to philanthropy either during their lifetimes or after their deaths. As of this writing, there are 236 pledgers, with pledges estimated at $600 billion.

Impact investing – adding value as an investor

You may believe, like many others, that some social problems require entrepreneurial solutions (e.g., green technology to tackle climate change). Or you may be drawn to solutions that could become financially self-sustaining, if not highly profitable (e.g., social housing). Both solutions promise a financial return, alongside their environmental or social impact. This is often called “impact investing”. It is commonly done through private equity investments, fund- or impact-investing platforms, on the stock market, or through cooperatives. According to the Global Impact Investing Network (GIIN), in 2022 the worldwide impact investing market passed the $1 trillion mark.

The right approach to impact investing will depend on, among other things, the amount of money you commit, your liquidity and diversification needs, and whether you prefer to fund early-stage or mature ventures. Private equity investments require comparatively large sums that cannot be cashed out quickly; they are thus not accessible to all. Investments in listed companies, on the other hand, are highly liquid and do not require large sums. Investing through the stock market, however, limits your options to rather mature businesses.

Dedicated funds and investing platforms come in all varieties. Some platforms crowd-fund loans for individual social entrepreneurs, allowing investments as small as €25. For those willing to invest €2,000 or more, some platforms offer curated investments into listed or unlisted companies. Funds that collect growth capital for social businesses or climate tech start-ups typically need a six-digit investment.

If achieving a positive impact alongside a financial return is an important motivation for you, you might want to know your added value. Does your investment create an impact that would not have occurred otherwise? This is plausible under two scenarios. One, if you are investing in a business that would otherwise have difficulty raising capital, yet has the potential to deliver impact. That is more likely for smaller companies or when you invest in a social business that does not offer the prospect of market-rate financial returns. Two, when you are actively engaging with company management to drive desired environmental, social, and governance (ESG) outcomes. Indeed, some impact funds pursue active ownership strategies through, for example, shareholder proposals and proxy votes. A prominent example of shareholder activism is the investment firm Engine No. 1, which drove out ExxonMobil board members who were sluggish to address climate concerns.

Corporate responsibility – setting science-based targets and pathways

In the past, corporate social responsibility (CSR) was viewed as an add-on activity – for example, a yearly charity drive – unrelated to the core business. This changed in 2019, when the Business Roundtable, an association of the CEOs of major US companies, announced a shift away from shareholder primacy. Today, leaders are increasingly expected to understand that long-term value can only be created by investing in employees, dealing ethically with suppliers, and protecting the environment through sustainable business practices. Whether intrinsic motivation, the licence to operate, a tactic to attract and retain talent, or an anticipation of business risk, integrating ESG aspects is a key component of modern leadership.

Regulatory developments will require companies to analyse and substantiate data on the impact of their business on the environment. This goes way beyond CO2 emission reduction targets. The EU corporate sustainability reporting directive (CSRD), coming into effect in January 2024, will require all large and listed companies (and, eventually, listed SMEs) to provide independently certified data on environmental rights, social rights, human rights, and governance aspects. On behalf of the EU Commission, the European Financial Reporting Advisory Group (EFRAG) has developed draft European Sustainability Reporting Standards (ESRS) to put this directive into practice, requiring reporting on the company’s impacts on biodiversity and, with a progressive phase-in, related reporting on its whole supply chain.

The days in which CSR was seen as a marketing fad with potential for greenwashing are thus over. Proactive leaders have recognised this, as evidenced by the more than 4,000 businesses and financial institutions engaging with the Science Based Targets initiative (SBTi) to reduce greenhouse gas emissions.

Conclusion

Many corporate leaders can exert influence for social and environmental impact with multiple levers by setting targets and defining strategies for their businesses, through their investments, and by giving. Increasingly, they take a strategic approach across all three dimensions. Innovative leaders even come up with creative solutions that blur the boundaries between them. A particularly inspiring example is Yvon Chouinard, founder of the outdoor clothing company Patagonia. The company recently announced a change in its ownership structure, declaring, “Earth is its only shareholder.” The founder family has transferred all ownership to two new entities, one owning all voting stock of the company (2 per cent) to permanently preserve its values, and the other one owning all non-voting stock (98 per cent). Through the latter, profits that are not reinvested back into the firm are paid as dividends to protect the planet. Patagonia expects to pay out an annual dividend of roughly $100 million.

About the Author

Olga Almqvist is the senior manager of the Societal Impact Financing Initiative (SciFi) at ESMT Berlin. SciFi is supported by the Bill & Melinda Gates Foundation, amongst others.

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By Rebecca Chunghee Kim

The Problem: CSR is under siege.

Is CSR simply a management fad? Ask business leaders this question and many will answer yes. Scepticism toward CSR is increasing for two main reasons. Some question its practical legitimacy: is its economic impact positive? Others question its moral legitimacy: is it genuine or just another marketing tool? What underlies these attacks on CSR, and how can business leaders and researchers effectively respond to them?

This paper is inspired by two commonplace observations, which lead to the two overarching research questions I seek to answer.

The first observation is that CSR is under siege. While CSR has gained fame as a buzzword, it has lost credibility, as its economic impact is difficult to measure, opportunistic managers are incentivised to distort information they provide to the public concerning their companies’ CSR, and corporate CSR programmes have been ineffective in delivering the benefits that CSR promised to society. This leads to the first overarching research question: what is the fundamental reason that CSR is under siege in contemporary capitalism?

The second observation is that capitalism has some shortcomings of its own that need to be reinvented. While capitalism is widely considered the best instrument that humans have devised for producing and distributing wealth, business misbehaviour, bankruptcies, and scandals are regularly found in capitalist economies, and sustained inequality, environmental destruction, societal exclusion, business and political corruption, institutional collapse, and distortion of competition are chronic by-products of the capitalistic system The aim of “maximising shareholder value” has been criticised as not being competitive, sustainable, inclusive, democratic, or ethical.

These are precisely the problems that CSR is intended to address, through a rebalancing of the power of the market with democratic and accountable government and a strong civil society. Yet CSR practised under a capitalist system is inevitably influenced by the same forces that result in capitalism’s well-documented problems. This leads to the second research question: assuming that CSR cannot be decoupled from capitalism, how then can CSR be changed or “reinvented” so that it produces better results?

The Context: Five “shortcomings” of capitalism that lead CSR’s failure

1. Runaway self-interest leads to CSR as window dressing

In recent decades, pushed by the ideas of Milton Friedman¹, who controversially wrote that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” (1970), and the movie Wall Street, which popularised the phrase “Greed is good”, social responsibility has often become dissociated from business, or positioned as an enabler of profit-making rather than a goal in itself. This has produced a “moral deficit” and an amoral, if not anti-moral, “greed is good” utilitarian school of economics.

One outcome of the pursuit of self-interest by individuals and firms is that it encourages business leaders to take a utilitarian view of CSR, to see it as a means to tackle organisational inertia, to raise company image and social reputation, or to conceal unethical activities. This often leads to CSR activities that not only fail to contribute to societal goals, but that are unethical, such as “window dressing” CSR.

2. Quarterly capitalism leads to quarterly CSR

Barton (2011)² argues that one of the greatest weaknesses, or misuses, of modern-day capitalism is a short-term operational and fiscal approach, which he terms “quarterly capitalism”. The pressures on CEOs and managers to meet quarterly earnings targets are strong, and undoubtedly contribute to efficiency and productivity. However, focusing on quarterly earnings consumes an extraordinary amount of senior executives’ time and attention, and excessive focus on short-term financials can adversely affect the long-term health and sustainability of the business itself. The tyranny of short-termism negatively affects the sustainability of companies and the broader economic system.

Quarterly capitalism naturally leads to a corresponding quarterly approach to CSR, with corporations embracing CSR as a PR tactic to earn positive media coverage and relieve public pressure. Short-term CSR, however, is utterly incapable of authentically addressing issues such as the climate crisis, poverty, and economic inequality. Addressing these issues in any meaningful way requires a long-term commitment and long-term strategies — over decades, not quarters.

3. Capitalism for the elite leads to elitist CSR

One of the fundamental drawbacks of global capitalism is that it produces uneven development and income inequalities, as the rich get richer and the poor get poorer. In his book on inequality in America, Saving Capitalism, Reich (2016)³ argues that capitalism should be for the many, not the few. In recent years, billionaires and large corporations have become caricatures of capitalism’s failures, as many feel that capitalism has left them behind and only benefits the elites.

Elitist capitalism gives rise to elitist CSR initiatives and outcomes driven by the well-off and people in positions of power. Trying to implement a CSR agenda created exclusively by management leaders or a CSR department is misguided. Elite-designed CSR is likely to be viewed with scepticism by many stakeholders, who are apt to doubt the sincerity of the initiatives or may interpret them as indications that the company is hiding something. Another manifestation of an elitist approach is the publicising of cherry-picked CSR success stories and examples of “best-practice” CSR.

While the CSR best-practice approach is commendable for showing how corporations can act responsibly — the cases of Patagonia and Nestlé are good examples — it can also have the effect of signalling that there is a best way — an elite way — to practise CSR. Arguably, the particular resources a company can apply to CSR and the needs of stakeholders vary greatly from company to company, and so the idea that there is a best way to practise effective CSR is simply wrong. For a firm to develop its own successful CSR programme, it must be free from an obsession with “best practices”.

4. Volume-oriented capitalism leads to volume-oriented CSR

Economies of scale, one of the most powerful engines driving capitalism, means that size matters. Obviously, capitalism provides advantages of scale in the output of goods and services; and maximising profit is perhaps the singular normative principle embodied in contemporary competitive capitalist economies. However, there is a limit to the value of volume, and of maximising profit; today’s world demands that firms move beyond maximising economic value to also creating social value that benefits stakeholders.

The “bigger is better” dynamic is often reflected in a corresponding volume-oriented approach to CSR, with corporations evaluating their CSR efforts by the yardstick of how much money is spent, and the public, influenced by Forbes’ ranking of companies’ charitable donations, holding a similar view. Many large companies spend large sums on philanthropic initiatives because they view it as closely related to their corporate visual identities, communications, and branding. This is a serious misunderstanding of what genuine CSR is. It is not the amount of money spent on CSR that counts; it is the effect that the CSR activities have on society.

5. One-pattern capitalism leads to one-pattern CSR

Most nations have become part of an integrated system of global capitalism. Within this broader pattern, however, are found significant differences from country to country in how business is conducted. For instance, Vogel (2019)⁴ describes Japan’s “ambivalent” version of shareholder capitalism, which does not converge on the US model of shareholder capitalism but preserves the characteristics — some would say strengths — of traditional Japanese business models, such as prioritising stakeholders over shareholders and long-term growth over short-term profits. Other Asian countries likewise exhibit strong tensions between the free-market capitalism model and more-closed Asian cultural dynamics.

Much unsuccessful CSR can be traced to ignoring the diversity among capitalist systems and business environments in which companies operate. Multinationals’ ignorance of host-country issues is a key factor in the failure of many CSR initiatives. Ignoring diversity may also lead to unethical or misguided CSR, as in cases where corporations compete based on a single universal criterion, such as the size of philanthropic donations, which disregards institutional dynamics and company size.

CSR: The way forward

Solution 1:

Base CSR on a sound ethical foundation
Beyond the question of effective CSR practices, a sound ethical stance is critical for a corporation’s survival. Kim et al. (2018)⁵ argue by investigating the Korean Air (KAL) “nut rage” scandal that the market punishes unethical business practices and businesspeople regardless of their CSR activities. The way to avoid ineffective window-dressing CSR in a “runaway self-interest” capitalist environment is clear: perform CSR from the ethical stance. A survey of business leaders around the world found that strong ethics is among the most important leadership competencies (Giles, 2016)⁶. Leaders’ demonstrations of strong ethical behaviour provide their companies with a measure of safety in the global market. Approaching CSR purely as a business strategy, without an accompanying ethical stance, can weaken public trust in businesspeople and in companies.

Solution 2:

Pursue coherent and long-term CSR
In recent years, business has come under increasing public pressure to engage with social problems and be a major contributor to addressing issues like climate change, income inequality, high unemployment, and spiralling budget deficits. Governments and international organisations are also pushing businesses to engage in solving social problems through initiatives like the United Nations’ Sustainable Development Goals (SDGs). Corporations are being pressured to reconsider roles, responsibilities, and expectations of business and to actively contribute to tackling global social challenges. Meaningful corporate efforts cannot be made under a short-term, “quarterly capitalism” approach. Long-term CSR programmes not only help a company gain public trust, they also spur innovation and fuel sustainable economic growth.

Solution 3:

Use CSR to demonstrate inclusive leadership
Involving as many people and viewpoints as possible into CSR planning and implementation — from initiation through communication to action and evolution — is the key to CSR success. An inclusive process enables more company employees and stakeholders to help create CSR solutions. Especially, inclusive CSR strengthens employees’ loyalty to the company and broadens their perspective on business and the marketplace. The ability to establish a sense of inclusivity and belonging is one of the most important competencies a leader can have. A strong case can similarly be made that CSR should be inclusive – planned and carried out in concert with stakeholders and the community.

Solution 4:

Make CSR about values, more than business strategy
Many strategic management scholars emphasise CSR’s potential as a means of maximising profit, positioning CSR activities as an element of business strategy. A overstressed business-strategy approach to CSR may be effective in some parts of the global markets, but is not likely to go over well in the future capitalist society. Values-based CSR and business-strategy CSR should not be seen as mutually exclusive; companies do not need to choose one or the other. What is important is not to perceive (or talk about) CSR solely as a way of earning profit. CSR initiatives and programmes may well contribute to profit, but only if they are also values-based.

Solution 5:

Match CSR to the firm’s assets, capabilities, and institutional setting
“One size fits all” CSR often falls short. Furthermore, things change; the meaning and dynamics of CSR are/will be different in the present and the future from what they were in the past. Business leaders, when they envision and design CSR initiatives or programmes, must not ignore the variety that exists in institutional environments, in consumer expectations, and in how capitalism is practised in different markets. CSR must be context-driven if it is to succeed. It must fit the unique DNA in each corporation, and match specific industries, nations, and forms of capitalism.
Rather than playing follow-the-leader and trying to replicate other firms’ CSR practices, companies are well advised to build their own unique portfolio of CSR activities that matches their particular business and institutional settings. CSR is most effective when it complements a firm’s unique business character and values and meshes well with local market and institutional dynamics.

In a nutshell, capitalism and CSR interact. The roots of many less-than-successful CSR activities lie in “shortcomings” of capitalism, that is, ways that business is practised that have become unmoored from the “capitalism” described by Adam Smith (who never used the word “capitalism” himself) that works in ways that benefit business and society. It is my hope that companies will increasingly pursue CSR that is ethical, long-term, inclusive, values-oriented, and well-matched to a firm’s particular characteristics and institutional environment, for I believe that such CSR can help us to meet challenges that threaten our way of life. I hope, as well, that CSR can restore its moral legitimacy and fulfil its promise to business and society in the renewed capitalist society after COVID-19.

Excerpted and reprinted from the original paper in Business Ethics, the Environment & Responsibility (2022).
https://onlinelibrary.wiley.com/doi/full/10.1111/beer.12414

About the Author

Dr Rebecca Chunghee Kim is Professor at Ritsumeikan Asia Pacific University. As a comparative CSR scholar, she is particularly interested in the varieties of capitalism and CSR, Asian CSR, creating shared value, institutional dynamics of CSR-HRM relationships, and inclusive leadership. She has published in many leading international management and business and society journals. Rebecca was a British Chevening scholar and completed her PhD in Management Research at Strathclyde Business School, UK.

References

1. Friedman, M. (1970, 13 September). “The Social Responsibility of Business is to Increase its Profits”, New York Times Magazine (122-6). https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html
2. Barton, D. (2011). “Capitalism for the Long Term”, Harvard Business Review (March 2011). https://hbr.org/2011/03/capitalism-for-the-long-term
3. Reich, R. (2007). Supercapitalism: The Battle for Democracy in an Age of Big Business. Alfred A. Knopf.
4. Vogel, S. K. (2019). “Japan’s Ambivalent Pursuit of Shareholder Capitalism”, Politics & Society, 47(1), 117-44. https://doi.org/10.1177/0032329218825160
5. Kim, R. C., Yoo, I., & Uddin, H. (2018). “The Korean Air nut rage scandal: Domestic versus international responses to a viral incident”, Business Horizons, 61(4), 533-44. https://doi.org/10.1016/j.bushor.2018.03.002
6. Giles, S. (2016). “The Most Important Leadership Competencies, According to Leaders Around the World”, Harvard Business Review (15 March 2016). https://hbr.org/2016/03/the-most-important-leadership-competencies-according-to-leaders-around-the-world

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Opinions do differ depending mostly on geography, where certain countries will reject the idea of being environmentally sustainable. However, in the modern western world CSR is a big part of achieving true sustainability. But why, and how?

Consequently, here’s why CSR is (for most places) a significant part of sustainability.

Moral and ethical obligations

By modern standards, all businesses are under a moral and ethical obligation to take CSR extremely seriously if they want to survive in the long-term future. For companies, it’ll involve things like recycling, daylight saving, clean energy, and more. They can invest in energy efficient equipment from JLA too. It’s something that’s constantly evolving and can’t be cheated, with no room to cut corners; the standards in this area are extremely high.

After all, companies are increasingly incorporating different levels of CSR into their business plans, which in turn also leads to a stark increase in things like staff loyalty, engagement and productivity. Obviously, these three things are fundamental to a firm’s survivability. Moreover, some firms have even developed schemes that have taught children in developing countries on how to code. Both CSR and sustainability have an eye on the future, and they’re working in tandem with one another rather than being opposed and butting heads.

In a recent survey, 75% of millennials also suggested they’d take a pay cut for a responsible company. Therefore, there’s even opportunities for saving and cost cutting there too!

Customer approval

It’s not only workers who’re pleased and find more appeal in the company either; customers do too. People like to do business with firms who’re self-conscious about what they put out into the world. How’re they influencing society? How do they show interest in something other than themselves? The right answers to these questions win customers over.

From here, it’s clear how sustainability is won through customer approval too. They come back to the businesses they know and trust, repeatedly using their products and services in full confidence that, in doing so, they could be doing good for the world too. There’s no guilt or hesitation; just a rock-solid relationship that benefits everything and everyone. Something like this could even edge out the competitors who aren’t as environmentally conscious too! 

Positive reputation

Of course, nothing makes waves like pleasing workers, customers and having a positive impact on society. Suddenly, businesses transcend a generic corporate perception, and almost take on an identity of their own. A report is built with all concerned, and from there a positive reputation can certainly blossom.

Good press, great reviews, customer recommendations, business partnership opportunities, a better cashflow, room for expansion; they all spawn from a devotion to CSR. Obviously, each thing also works wonders for sustainability too, so if CSR can be prioritised, it’ll boost the prospects of any business substantially.

Conclusion

In the end, CSR and sustainability are tightly wound together. One can almost not be achieved without the other, so it’s important for companies to make significant progress here. Once done, word of mouth will spread, and the business will be much better off in the future!

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Literature is, by and large, invaluable in one’s understanding of human nature and the world in general. It serves as a gateway to events of the past and an instrument to grasp different views of reality and to connect with our own humanity. But how can literature help in the cultivation of ethics in the business environment?

In 1957, Russell Kirk wrote, “I mean that American businessmen, like most other Americans, are deficient in the disciplines that nurture the spirit.” A lack of engagement with the humanities-“that great body of literature that records the wisdom of the ages, and in recording it instructs us in the nature of man”-has dire consequences not only for the individual, but for the business he so values.

Engaging great works of literature has instrumental and intrinsic values for those who choose to engage. Engagement with great thoughts and great characters involved in great events shape the minds of readers. Readers of great literary works will be more inclined to act ethically, come up with creative solutions, and have the strength to act on their convictions.

ETHICS

Literature provides us with an awareness of humanity’s depths and heights. Without examples we have nothing to model our own behaviour after or basis on which to identify potentially tragic flaws in ourselves or others. It is helpful to know of people like Rosa Parks, Mahatma Gandhi, and Mother Theresa in comparison to Stalin, Hitler or Mugabe.

Fiction reading enhances social cognition through its simulation of social content. This essentially means that fiction enhances the perception, recognition, and understanding of other individuals.

But historical examples have a way of seeming too distant, or their deployment in examples of heroism and evil is so common as to desensitise us from their value.  Literary characters often feel more personal, more visceral, and even easier to connect with. Atticus Finch of To Kill a Mockingbird, Elizabeth Bennet of Pride and Prejudice, Raskolnikov of Crime and Punishment, and Romeo and Juliet seem closer to us; easier to connect with. Think of the rise in popularity of Alexander Hamilton now with his life story having been dramatised in an award-winning Broadway musical. His writings have been around for over two hundred years and historians have been writing about him for decades, but it is only now that people have formed a real connection with him.

Case studies serve as the basis of much of the business education and the foundation of ethical lessons and therefore most of our titans of industry have engaged in these “historical” texts. But, literature provides value that case studies do not.

Fiction reading enhances social cognition through its simulation of social content. This essentially means that fiction enhances the perception, recognition, and understanding of other individuals. An independent research by neuroscientists, Diana Tamir, David Comer Kidd, and Nicholas Carr has shown that through fiction we can deepen our understanding and appreciation of others. The advantages of literary fiction are based on comparisons to popular fiction, various forms of non-fiction and reading nothing at all.

An enhanced moral imagination changes our disposition by cultivating a greater sense of connectedness, empathy, and familiarity.

We don’t necessarily need sophisticated neurological studies to prove this – though they help – just think of how much more impactful a story like A Christmas Carol is versus a chart put out by the World Bank. It’s common knowledge that narratives and stories help to make points resonate more. Hans Rosling was able to reshape how we think about statistical realities through his use of examples in his TED talks and his book Factfulness.

Literature and the arts give us the ability to see the entire person. In business we oftentimes think of our customers as data points or objectify them as pieces of our strategy. Managers can come to see their employees as assets. Literature can have a humanising effect. It is far easier to take advantage of someone or to otherwise treat them poorly if we don’t see them as people with hopes, fears, families, and hobbies but as objects to be used for our own objectives or obstacles to overcome on our way to generating more revenue. Art in general, and literature in particular, trains our moral imagination, it brings us an appreciation for humanity writ large and to see the value of things beyond their utility. An enhanced moral imagination changes our disposition by cultivating a greater sense of connectedness, empathy, and familiarity.

In business, this point is particularly important as we seek to enhance the value we bring to our stakeholders by making improvements to our processes, products, and strategy. But the constant push for improvement can force us to lose some of what it means to be human, and to disconnect with those things which literature and the arts bring us into contact with.

COMPETITIVE ADVANTAGE

Aside from ethics, literature will give us the power to make better decisions strictly aimed at building stakeholder value. Take for instance investment decisions. Even when models favour long term investment decisions over those that will lead to immediate returns, the pressure to pursue gains in the short term can be too difficult to overcome. Moreover, if one is in the minority in pushing for a more profitable but unpopular long-term investment it can be easy to cave to the majority.

The same body of research that proves literature can strengthen our ethical resolve argues that literature can strengthen our resolve to maintain steadfast in the face of strong opposition when evidence is clearly and convincingly on our side. Reading literature and engaging with the arts is fundamentally different from other types of learning activities and it has a more lasting and powerful influence.

Being able to think about problems and opportunities differently than others offers a decisive competitive advantage. Literature allows us to think uniquely.

We should also not discount the effects on creativity that engaging the imagination through great works of literature can have. In an ever-competitive marketplace where the proliferation of knowledge about products, developments, and competitors spreads more quickly than most of us can keep up with; a well-developed imagination is crucial. Being able to think about problems and opportunities differently than others offers a decisive competitive advantage. Literature allows us to think uniquely.

For instance, a senior sales executive with whom I had worked credited her reading of Tom Wolfe’s The Electric Kool-Aid Acid Test in high school with giving her insights about grassroots marketing and understanding contagion.

A Director of Human Resources found ways his department could better organise and communicate with the rest of the company after reading Franz Kafka’s The Trial with his son as part of a school summer reading project. He realised how jargon and disparate departments can be confusing and defeating to the average employee, so he rewrote manuals in common language and streamlined communication channels.

TAKING ACTION

None of this really matters unless it is actionable – which it is.

Literature reorients our worldview. A reoriented view will naturally yield better behaviour. Literature also broadens our horizons and brings forth a more complete picture of individuals, their environments, ourselves and a richer appreciation for experiences. Those broadened horizons lead to changes in behaviour that do not have to be premeditated – they just happen.

Reading great literary fiction reshapes neural networks in a way that changes how we view situations and evaluate the value of others. By reshaping these networks, the calculus for action becomes less difficult as we are less inclined to find negative behaviour appealing or necessary.

People tend to naturally act in accord with commonly understood ethical standards when there is a shared identity, purpose, and connection. That is, when we see others as fully human we are less likely to explain away our bad behaviour that can have negative consequences for them. For instance, I am far less likely to lie to someone about a product they are about to buy if I understand how hard they’ve worked for their money, the troubles they are experiencing at home, the hope they have for what they are about to purchase, or what they need from the transaction. If I can see some of myself in them, or empathise with them, I am less likely to take advantage of them. This isn’t necessarily an intentional thought process, but it arises from a disposition brought forth by a moral imagination nurtured by literary works.

As already referenced, reading great literary fiction reshapes neural networks in a way that changes how we view situations and evaluate the value of others. By reshaping these networks, the calculus for action becomes less difficult as we are less inclined to find negative behaviour appealing or necessary.

CONCLUSION

For all the handwringing about how people no longer read or how society is changing because of technology, an understanding of history leads us to recognise that our time is not unique. The Greeks wrote mythological tales about the consequences of single-minded pursuit of domination and transformation through technological advancement. Plato and Aristotle lamented a youth undisciplined and unconcerned with serious matters of the mind.

What we do not need is a return to some time that never existed, but a recognition of the ever-present challenge posed by the human condition which moves us to shape the world around us yet the inability to do so without negative, unintended consequences.

Literature does not require an esoteric engagement with abstract concepts removed from reality. Simply review a high school summer reading list, or some other list of the top classics, and pick one that appeals to you. Read it. Put it down and see what happens.

About the Author

Kyle Scott is an Affiliate Faculty Member at Baylor College of Medicine, Center for Medical Ethics and Health Policy. He has held several university teaching appointments and currently serves at the head of international development efforts at a U.S.-based manufacturing firm. He has academic publications in the areas of business ethics and political philosophy. His work has also appeared in popular outlets such as Huffington Post, Houston Chronicle, Christian Science Monitor, and others.

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For global businesses to thrive, “doing sustainability” is no longer an option. Tammi L. Coles spoke with recognised CSR researcher and author CB Bhattacharya about how this is revealed in the “People and the Planet” philosophy of the successful Ferrero Group.

Corporate Social Responsibility (CSR) and corporate sustainability have come to represent a broad range of ethics-driven standards for business practices that go above and beyond legal requirements for how corporations draw from and contribute to natural resources and social communities.

At ESMT Berlin, how companies communicate their ideals, engage stakeholders, and otherwise achieve their goals in CSR is the subject of study by Professor CB Bhattacharya, an internationally recognised researcher and author on corporate sustainability. Since 2014, Prof. Bhattacharya has held the Pietro Ferrero Chair in Sustainability, founded by the family-owned Ferrero Group – the confectionary company behind global brands like Nutella, Rocher, and Kinder. The Chair was named for the late Dr. Pietro Ferrero, who from 1997 until his untimely death in 2011 was company CEO together with his brother Giovanni. 

In keeping with its commitment to a “People and the Planet” philosophy, Ferrero’s latest annual CSR report and recent activities reaffirm its intention and practice of corporate sustainability for its consumers, workers (current and former), stakeholders, and their communities.

Corporate Sustainability is About Choices

The Ferrero Group has set goals for certifiably sustainable sourcing of main ingredients like cocoa, sugar, and palm oil by 2020. Some of these goals were already achieved in 2014, such as 100% palm oil certified as sustainable and 100% virgin cardboard coming from sustainable supply chains.

These sustainability targets and milestones are visible in Ferrero corporate reporting and marketing, contributing to public awareness of corporate sustainability. “Current research shows that good stakeholder engagement can lead to better business outcomes – whether it is risk reduction, better reputation, more loyal customers, or higher employee engagement,” said Bhattacharya.

Furthermore, these targets are backed by commitments that include investment in water and energy technologies that increase production efficiencies, contribute to responsible natural resource management, and minimise environmental impact across Ferrero’s entire value chain.

“Corporate Sustainability is Not Contradictory to Corporate Growth”

said Bhattacharya. In fact, research by Prof. Bhattacharya and Prof. Sankar Sen at Baruch College’s Zicklin School of Business showed that highly innovative companies with high-quality products actually see more in their investment in CSR activities than less innovative companies.  “Some of the executives I interviewed for my latest research project told me that it simply makes good business sense,” said Bhattacharya. “What is more, rather than being contradictory, the choice to not act on sustainability is increasingly costly, as businesses face serious challenges related to climate change. So ‘doing sustainability’ is becoming the ‘to be or not to be’ question for companies.”

During the last CSR reporting period, for example, the Ferrero Group acquired the Oltan Group, a leader in hazelnut supply, processing, and sales in Turkey and part of the Ferrero Farming Values (FFV) sustainable farming programme. CSR investments in raw ingredients like these, alongside expansion in sales and manufacturing, helped Ferrero see 13.4% growth over the previous year. 

Corporate Sustainability is a People Practice

Ferrero’s commitment to high-quality products is also reflected in its high standards for CSR implementation at all levels, including in human resource management. New employees receive Ferrero’s Code of Ethics, first published in 2010, together with their working contracts. “Employee engagement is vital to the success of any long-term corporate sustainability activities,” said Bhattacharya. “This is why it is so crucial to enable employees to contribute to these activities, for example, the way Ferrero does it – via training.”

Corporate Sustainability is Global and Local

While remaining family-owned, the Ferrero Group is present in 53 nations with 22 production plants worldwide. As part of its environmental commitment, Ferrero is especially transparent regarding its palm oil supply. This includes 100% traceable data on its palm oil sources, the approximately 36,500 smallholders in its supply chain, and the company’s efforts to protect forest cover and biodiversity. In Côte d’Ivoire and Ghana specifically, Ferrero joined eleven of the world’s leading cocoa and chocolate companies in a pledge to end the deforestation and forest degradation that has marred their contribution to the global cocoa supply chain.

In addition to having corporate sustainability ideals drive global supply chain and production targets, Ferrero extends these values into projects that centre consumers and their families at the heart of their activities. At the international level, the company actively participates in initiatives led by NGOs such as UN Global Impact and CSR Europe that promote corporate sustainability alongside human rights; economic, environmental, and social sustainability; anti-fraud and anti-corruption strategies; and consumer protection. At the local level, the Michele Ferrero Entrepreneurial Project contributes to child care and social enterprises in the health and education sectors of Cameroon, India, and South Africa. Ferrero’s Kinder+Sport initiative, which celebrated its 10-year anniversary in 2015, held more than 3,100 sporting events with 4.1 million children living in 25 countries.

“Increasingly, different stakeholders are laying out their expectations about how companies should contribute,” noted Bhattacharya. “They need to, although sometimes their expectations are in conflict with each other. A company may feel lost – where do I start, which issue do I tackle? As Ferrero has shown, for example, tackling human rights challenges can be vital to a smooth supply chain operation. Each company must decide which of these issues are material to its operations, existence, and purpose.”

About the Author

Tammi L. Coles is the Digital Editor for Corporate Communications and Marketing at ESMT Berlin. She has extensive experience in American English copywriting, content marketing, translation, and communications project management.

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Adopting CSR as a company philosophy in China seems to be more challenging than could be expected. In this article, David De Cremer looks into an example of a Chinese company that has over the years grown into a major global player and in this process has developed a long-term vision embracing the goal of being a responsible value-driven organisation. This company is the telecom giant Huawei.

It is no secret that most businesses have adhered for a long time to Milton Friedman’s wisdom that business should only care about making profits for their shareholders. Since the outbreak of the financial crisis at the end of 2007 – early 2008, this trusted wisdom, however, has been challenged by many in society. An important question emerged: how can business aim to make a profit by also being socially responsible? As a result, the focus within the business world shifted to addressing the questions of what social function businesses have and how they can communicate, implement and manage those functions. One big challenge in this process is to make clear to the larger audience that the motives of companies are coloured by responsible and ethical values. Hence, the management strategy of Corporate Social Responsibility (CSR) was born. As the international magazine The Economist noted in 2008, “CSR has arrived” (19 January 2008, p. 24).

In many Western societies, CSR is now a well-accepted company philosophy, whereas in many emerging markets, CSR is still underway and its shape and implementation processes are not entirely clear yet. Looking at the biggest market in the world, China, several challenges clearly exist when it comes down to making CSR work. Overall, CSR as a concept is generally accepted very well in China. The fact that CSR is looked upon positively in itself is not such a surprise. The country’s history is shaped to a large extent by Confucian values emphasising the importance of building harmony and doing good. Despite Confucius, adopting CSR as a company philosophy in China nevertheless seems to be more challenging than could be expected. Particularly the fact that China is known as the factory of the world and a key supplier to feed western customer markets has not helped when it comes down to CSR. The norms and expectations that have emerged as a result of this focus on manufacturing and export has not fostered a business attitude that takes into account the welfare and well-being of their larger society (see, for example, the local problems with air and water pollution).

In more recent years, however, the results of this manufacturing economy have become more visible to Chinese citizens and business strategies and policies are increasingly being criticised more by society. This increased awareness has led to the situation that Chinese companies that want to go public have become more motivated to signal their social and environmental awareness/responsibilities to customers and stakeholders, both in China and outside of China. Moreover, because CSR is rapidly becoming a globally shared business value, evidence is also mounting that companies could achieve commercial success in ways that create social value for society and its members. This makes that CSR is not only an ethical imperative anymore, it has also grown into having economic value. These reasons have led to a stronger desire from Chinese companies to optimise their CSR implementation and execution. Despite this desire, very little persuasive examples of Chinese companies being able to balance sustainability, responsibility and profitable business are known. This is unfortunate because such examples could inspire and guide other Chinese companies to transform the Chinese business world and market into a more sustainable one.

Huawei as a Case Study

Here, I want to discuss such an example of a Chinese company that has over the years grown into a major global player and in this process has developed a long-term vision embracing the goal of being a responsible value-driven organisation. This company is the telecom giant Huawei. Huawei is considered the pride of many Chinese when it comes down to corporate achievement at both the local and global level. Huawei can be considered a Chinese company in its foundation, but one that has a global appeal (more than 40,000 non-Chinese employees – out of 170,000 – are employed), making that its DNA represent a mix of East and West. Its rise as an international leader was firmly established when in 2012, Huawei surpassed Ericsson as the world leader in terms of sales revenue and net profit. Ever since then, revenue has only increased each year. In the fiscal year of 2015 Huawei’s revenue reached CNY395 billion (US$60.8 billion) and CNY36.910 billion (US$5.68 billion) in net profit, which was an increase of 37% year-on-year (in 2014 revenue reached CNY288.197 billion (US$46.515 billion) and CNY27.866 billion (US$4.49 billion) in net profit.

The interesting aspect of Huawei is that it represents a Chinese example of how to put business first while at the same time being able to make profit in a responsible way. As one executive I interviewed noted, “While we pursue strong growth (see their impressive increases in annual sales revenue), we proactively fulfil our responsibilities worldwide as a corporate citizen.” Huawei is especially known for its relentless focus on customers and improving quality of services to this key stakeholder. Being an information and communications technology (ICT) solutions provider, their social purpose is completely built around this stakeholder, that is, they want to build “A better connected world”. Huawei believes in the idea that connectivity will be everywhere improving life for people even in the far reaches of the world.

Companies being driven by strong social purpose usually endorse one or several of these values: dignity, solidarity, plurality, subsidiarity, reciprocity and sustainability. Based on interviews with Huawei representatives, I identified that the values that resonate the most with their company were the following: reciprocity, sustainability, and solidarity. How does Huawei endorse and put these values in practice?

1. Reciprocity

For any kind of business it is important that stakeholders adopt a positive attitude to you and that a sense of reciprocity is built. To establish such reality, a socially responsible company takes the first step towards their stakeholders to establish such a reciprocal relationship in which shared value is created. Huawei is no stranger to this idea as can be illustrated by their focus on two important stakeholders: their customers and their own work force.

A focus on customers: The founder of Huawei, Ren Zhengfei already argued in the early years of Huawei that everyone in the company had to turn their eyes to the customers and their backs to the bosses. For example, several years ago an institutional investor delegation led by Stephen Roach, chief economist for Morgan Stanley, visited the Huawei’s headquarters in Shenzhen. Such visits were usually made by venture investors hoping to get a buy in to Huawei. Ren Zhengfei asked Fei Min, his executive vice president of R&D, to entertain the delegation. Later, Roach said, in disappointment, “He was rejecting a team with $3 trillion.” The explanation by Ren Zhengfei was quite telling: he told us that he would meet any customer in person, no matter how small they were, but that Roach was not a customer. This example illustrates that Ren Zhengfei walks the talk by signalling that customers are the soul of the company and therefore the focus of the company.

A focus on employees: Huawei considers employees as their most valuable assets and key to retaining their competitiveness and leadership position in the long run. This focus is reflected in the way they provide appropriate career paths. The company invests heavily in employee training. For example, in 2013, an average of 37.29 training hours per employee was provided. In line with their ICT focus they have instituted an eLearning system to provide online interactive training that assists employees to enhance their capabilities. As of 2013, employees have attended eLearning training 3.32 million times.

Another important focus concerns health and safety. To battle air pollution, Huawei uses since November 2013 high-voltage electrostatic air purifiers at Beijing campuses. This initiative has led to a reduction of PM2.5 (particulate matters with a diameter less than or equal to 2.5 micrometres and considered responsible for lung cancer) to below 35, whereas the average outdoor levels are 298. Also food and water safety concerns are addressed by improvement of drink water quality by means of modernising water purification systems and employees are reminded and encouraged to monitor food safety for a healthier life.

2. Sustainability

The value of sustainability is crucial to Huawei’s long-term vision to create benefits for each stakeholder. One important reason why a focus on the long-term in itself is sustainable for Huawei is that the company is privately held. Not being a public company allows Huawei to work on its 10-year plans, while its competitors struggle to follow near-term fluctuations of the capital market. Furthermore, in line with Huawei’s focus on connecting people to make the world a better place, a long-term vision is needed as of today still about 4 billion people are not connected in the digital world thereby lowering their life quality as a result of being deprived from important opportunities and information.

According to Huawei, a healthy and steady development of the supply chain is the key to the sustainability of the entire industry chain. Huawei works hard to achieve sustainability but also pushes suppliers to conduct sustainability management. In fact, all suppliers must follow sustainability agreements with Huawei if they want to engage in any business activity with them. Huawei audits the performance of suppliers in terms of labour, human rights, the environment, social impact and their ability to comply with the Supplier sustainability agreement. In addition, suppliers also have to formulate plans to ensure continuous improvement, which is crucial for suppliers if they want to continue working with Huawei. Finally, in light of each of these requirements, each supplier also has to sign the honesty and integrity agreement. This agreement ensures fairness, justice, and integrity and prohibits bribery, unfair competition and fraud. Overall, about 95% of suppliers sign this agreement.

What the above signals is that Huawei believes that collaboration regarding sustainability will reveal better business. For this reason, Huawei collaborates with suppliers worldwide for the purpose of win-win development. This win-win idea is an important value for Huawei and is advocated by its founder’s philosophy that business is not only about winning by being a ruthless competitor rather it is winning by means of cooperation. As one executive explained, “Merely maximising our own interests is not a long-term strategy. Only sustainability can keep a company growing.”

This attitude and the fact that sustainability is part of Huawei’s global strategy and DNA is also a reason why employees want to join Huawei, which was illustrated by Huawei being considered an employer of choice by Linkedin 2015. Moreover, Huawei’s value-driven approach to adopt a cooperative mind-set in a competitive market can be illustrated by, for example, their efforts in the UK. Huawei has put much effort into convincing the British government and general public that they and their procedures can be trusted, by (a) setting up the Cyber Security Evaluation Centre in Banbury to ensure the quality of their equipment, and (b) cooperating with the GCHQ, the UK’s signals-intelligence agency, to ensure that the networking equipment and software is reliable and secure. In fact, one could even argue that the recent and growing success of Huawei in Europe can be attributed partly to their philosophy of developing cooperative relationships with competitors in the market.

3. Solidarity

Huawei supports the communities where they operate and contribute to their well-being. Closely related to the value of reciprocity they believe in the social power of giving back to the communities where they operate via social programs on education and entrepreneurship. In their efforts to contribute to local communities, Huawei depends to a large extent on the willingness of their employees to participate in these activities. This type of employee engagement is inspired by Huawei’s philosophy that doing good to their local communities is a strong incentive in itself.

The implementation of this philosophy varies from country to country. In China, the Charity Love Association is brought to life through which Huawei employees can volunteer to support educational initiatives. Related to this is the Dream Library program Huawei initiated that provides books to children in mountainous areas to help them, through education to achieve their hopes and dreams. In Australia the Huawei community Fund is created to offer Huawei employees the opportunity to apply for support from Huawei via cash donation. For example, Huawei Australia has made such donations to support study on children’s diseases and MediaPads to enable training for doctors and pediatric nurses in poor, remote areas that lack internet connectivity. This type of support is established so that Huawei’s employees are motivated to introduce inspiring ideas and initiatives to their communities. Finally, in the US, Huawei supports NGOs such as K to College, which is a non-profit organisation that operates free school and dental supply programs for underprivileged students in California.

Another way to ensure that communities benefit from Huawei’s key business, that is, to connect people, the company also creates value by measuring the value of solidarity through the Global Connectivity Index (GCI). This index measures how 50 nations are progressing with digital transformations using information and communications technology (ICT). Huawei believes that digitalising the economy will improve the quality of economic growth to ensure a sustainable tomorrow. Much work is still to be done because, for example, 41% of enterprises within EU borders are non-digital and only 2% of enterprises in the EU truly exploit digital opportunities.

Conclusion

Huawei sees contributing to communities (by means of education and social contributions), and assessing and monitoring (by means of GCI) as important strategies to create sustainability in a connected world that drives on reciprocity and solidarity. Indeed, it is their belief that for a country to fully realise its full potential, a strong relationship must exist between government leadership, a trained workforce and investment in supply-side ICT, all aspects that can be found in the three values that Huawei prioritises: reciprocity, solidarity and sustainability. And it is the combination of these three values (reciprocity, sustainability and solidarity) that makes Huawei a believer but most of all an important leader and example in the field of CSR for Chinese companies today and in the future. That such examples are needed is further underscored when looking at the Corruption Perceptions Index which indicates that China is currently ranked 100 out of 175 countries, scoring only 36 on a scale from 0 (highly corrupt) to 100 (very clean).

Of course, it is also necessary to note that in order to truly influence the larger audience, it is also necessary that customers are aware of the CSR activities that are initiated and how they reflect the values of the company. Especially, in China’s awareness among customers when it comes down to knowing the social purpose of companies is relatively low. Huawei tries to address this awareness challenge by conducting an annual survey among their stakeholders and shares these results in their Annual Sustainability Report which can be read via the corporate website and distributes results and CSR activities via social media. The company also organises several CSR and sustainability events to raise the awareness of their key stakeholders such as Huawei-CSR Europe conference, Huawei sustainability conference, and Huawei supply chain and sustainability summit. These events allow the key stakeholders to provide feedback to Huawei and exchange thoughts about what can be done more. Finally, Huawei, as a global company, is also involved in industry associations such as GeSI (Global e-Sustainability Initiative) to share best practices and alongside with customers identify new opportunities.

Chinese customers care more about the (financial) consequences of business strategies rather than the social motives of a company. As such, CSR is, although generally accepted, evaluated mostly in terms of “what” results it can achieve rather than “how” it achieves those results. Huawei does deliver the numbers and thus satisfies the what-question, but in contrast to many other companies in China, they also address explicitly how they do business. The notion of business ethics is continuously used as a quality indicator of how business is done, which entails, for example, demanding honest ways of doing business without bribery from their suppliers. In fact, in societies where feelings of ethics and trust are evaluated as relatively low (China reports each year lower scores on the trust present in their society), it is necessary that giant players like Huawei lead the change of how to do business if they ever want to change the rules of the business game and endorse higher values in the operation of their local markets. The continuous efforts of Huawei to bring the “how” and “what” together in their CSR strategy testifies to this ambition.

Featured image courtesy of: mediaonlinevn.com

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About the Author

David De Cremer is the KPMG professor of management studies at the Judge Business School, University of Cambridge, UK, and a fellow of the Ruihua Innovative Management Research Institute at Zehjiang University, China. He is the head of the department of Organisational Leadership and Decision-Making at Judge Business School and was currently named one of the 2016 Global Thought Leaders on Trust. Before moving to the UK, he was a professor of management at China Europe International Business School in Shanghai. He is the author of the book Pro-active Leadership: How to overcome procrastination and be a bold decision-maker (2013) and his new book on The Huawei Story will be out in print in September 2016.

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