The Dos and Don’ts of Corporate Social Responsibility

Corporate Social Responsibility (CSR) — or business policies and practices that promote social good — has become something of a buzzword for business executives. In its various manifestations, CSR can refer to diversity programs, community service initiatives, charitable donations, or environmental emissions reductions. For example, Target was a major sponsor of the New York City Pride Parade this year, gaining publicity and aligning the brand with progressive values. Because these programs allow firms to generate public goodwill and increase brand recognition, CSR is increasingly an integral part of corporate strategy. Indeed, a group of Fortune 500 CEOs at the recent Business Roundtable issued a statement on the ‘Purpose of a Corporation,’ stressing the importance of creating value for all stakeholders, not just shareholders [1].

Of course, if businesses truly committed to socially responsible behavior, we would all be better off. Companies would strive to follow best practices, reduce their environmental impact, set ethical labor standards, and donate some of their resources to philanthropic causes. Unfortunately, businesses are unlikely to engage in CSR for normative reasons (i.e., because they should), but instead must be convinced to do so because of instrumental reasons (i.e., because CSR directly helps the company’s profitability).

For that reason, much academic research has been dedicated to demonstrating the instrumental impact of CSR on companies’ bottom lines [2]. These initiatives make firms more appealing to consumers — and are correlated with brand recognition, consumers’ likelihood of choosing the company, consumers’ evaluation of product quality, and customer loyalty [3][4][5][6]. CSR also improves employee outcomes: it is associated with increased employee satisfaction, organizational citizenship behavior, firm attractiveness to potential employees, and reduced employee turnover [7][8][9][10][11]. Further, CSR is positively related to firm reputation and investor sentiment, particularly with the rise of socially conscious impact investing [12][13]. Finally, there is a robust positive relationship between CSR and corporate financial performance: CSR improves companies’ bottom lines [14].

Consumers, employees, and investors have begun to deviate from traditional economic incentives like prices, wages, or returns and to incorporate information about social value like environmental sustainability, corporate culture, and business ethics into their decision making. In order to remain competitive in this changing economic culture, firms have begun touting their CSR programs, funnelling money into philanthropy or social movements, advertising their new green policies, boasting about diversity, and emphasizing their commitment to local communities.

However, some of these companies have come under fire for so-called ‘pink washing’ or ‘green washing,’ which describe business practices that are superficially LGBTQ friendly or environmentally friendly, but do not demonstrate a genuine commitment to the issues. Firms may be tempted to engage in a very shallow view of CSR to advertise socially conscious values and gain public favor while still making corporate decisions to maximize short-term shareholder value at the expense of environmental or social concerns [15]. For instance, BP launched a “Beyond Petroleum” campaign, presenting itself as an environmentally friendly energy company while simultaneously side-stepping safety regulations to save time and money; the results of these actions culminated in a major oil spill in the Gulf of Mexico.

Over the years, consumers and investors have become understandably suspicious of businesses’ CSR policies, and they respond very negatively to reports of green washing [4][16][17][18]. Watchdog agencies and demands for increased transparency are providing the public with more accurate information on CSR performance. Legal scholars have argued that consumers can claim false advertising and investors can claim security fraud to hold companies legally liable for faux-CSR actions [15]. Beyond legal action, green washing impacts consumer behavior and consequently, firm performance. Researchers have found that symbolic actions on environmental issues and a discrepancy between symbolic actions and substantive policies (ie green washing) have a negative effect on the financial performance of a company [19]. 


The AI Governance Challenge

So, CSR has a positive effect on consumer behavior, employee engagement, and company financial performance, but companies are incentivized to advertise social values while pursuing short term profits in whatever way they can. This discrepancy between advertised values and actual behavior, when discovered by the public, has a negative effect on financial performance [17][19].

What’s Next for CSR?

If people are skeptical of CSR initiatives, is it still beneficial for firms to engage in them?

The answer is yes — if firms truly engage in CSR, are transparent about their performance, and carefully promote these policies [17]. For example, firms could publish independently audited CSR reports and comply with watchdog agencies. Companies with substantive CSR action and with transparent reporting may receive positive recognition for their policies, and at the very least will not risk being falsely accused of green washing. Additionally, companies should advertise their CSR efforts with care. Although consumers are suspicious about CSR initiatives, advertising the economic motives of CSR policies in addition to the altruistic motives — or in other words, being honest about why CSR is good for society and for business — reduces the negative effects of perceived green washing [16].  According to Illia et. al. (2013), “Corporate communications should present CSR activities as integrated into the company’s business and demonstrate that profit is not pursued without consideration for society [17].”

CSR can be a powerful tool for societal improvement by aligning business priorities with societal needs. Innovative and efficient business, driven by market forces, could generate rapid societal improvements in a way social protests, political movements, or governmental interventions could not. If companies can avoid the temptation to greenwash and can effectively communicate their actions, CSR may be a great tool to improve consumer behavior, employee engagement, and financial performance.

Resolution 2020: To proactively streamline utilization of erudite vocabulary

It’s the beginning of a new year and I have resolved to take things into my hands.

This year, I will seamlessly integrate goal-oriented physical exertion into my calendar, to synergistically build it up as a core competency.

That’s not all.

I have also decided to proactively cultivate my bibliophilic propensities by incorporating stretch reading goals.

In my excitement, I also mentioned to my partner that we could collaboratively re-conceptualize our domestic chore allocation and substantially increase our efficiency by leveraging on our mutual vision of an egalitarian household. Would you believe it, he brushed me off! To that, I say, he is not being customer-centric!

Why am I talking like that, you ask? That’s a resolution as well. To speak the way corporations and brands talk: in jargon.

Jargon, jargon, everywhere

Art by versusthemachines

Many years back, on the popular TV show F.R.I.E.N.D.S, Joey Tribbiani was given the important responsibility of writing a recommendation letter for his dear friends, Monica and Chandler. Trying to be articulate, he describes them as “humid, prepossessing Homo sapiens with full-sized aortic pumps” or in other words, “warm, nice people with big hearts” — thanks to the beauty of the right-click synonym feature in Microsoft Word [1].

I might have laughed a riot back then, but now I shed tears when I see jargon. And jargon is everywhere!

There somehow seems to be a misconception that longer or less common words make the speaker more intelligent. It’s no surprise, then, that jargon has infiltrated corporate vocabulary so deeply. From creating paradigm shifts to building digital switchboards, we have likely all sat in meetings, not entirely sure what some such phrase was meaning to say. What’s worse, though, is how jargon has entered the world of consumer advertising. The purpose of advertising is to simplify a product and explain its unique selling proposition to the customers as succinctly as possible. And yet, we see advertisements with abstract taglines all around us. 

Why do we have this obsession with large words?

Duly or not, people see a positive correlation between vocabulary and intelligence. The more complex words and sentence constructions used, the more intelligent a person is perceived to be (Pennebaker, 2014). In an interesting analysis of 50,000 college admission essays, Pennebaker and coauthors found that higher grades were associated with complexly organized objects and concepts, while lower grades were associated with more personalized writing styles [2].

Grice’s Maxim of Manner, a touchstone for many writers, is quite clear: it recommends “to be as clear, as brief, and as orderly as one can in what one says” [3]. However, the complexity emerges on the reader’s side. Simple text comes with the baggage of the assumption that the author did not put too much thought into writing this. A simple language representative of a simple idea requires less effort. But a complex language, requiring more effort, seems worth the process.

Complex does not mean good

Thankfully, behavioral science research has an antidote. In a paper titled ‘Consequences of erudite vernacular utilized irrespective of necessity: Problems with using long words needlessly’, Oppenheimer explores the link between fluency and complex words through a series of interesting experiments [4].

In the first experiment, 6 personal statements for admission to an English literature course at Stanford were created, each with a different level of complexity. The most complex version was (probably) eerily similar to what Joey Tribbiani wrote, given it was a direct result of replacing words with their longest synonyms from Microsoft Word. Participants were shown one of these statements at random and were asked to accept or reject this candidate for admission to the course. The results showed that the most complex statements had the lowest ratings and the most adverse decisions. On the other hand, the simplest statements had the highest acceptance rate. The authors conclude that fluency of reading causes this effect. Complex sentences are hard to read and hence, hard to judge.

In follow up experiments, to remove the biases associated with the admissions process, the author shows simple and complex translations Rene Descartes Meditation IV to participants and ask them to judge the intelligence of the author on a 7 point scale. In line with the previous results, complexity once again negatively impacts the participant’s assessment of the author’s intelligence.


The AI Governance Challenge

Less is More

Despite the limitations of the experiments, a key takeaway from this paper is the important link between fluency and understanding. To put it simply, simplicity is the best bet.

If there is anything that we have learnt from behavioral science, it is that human beings are not perfectly rational, do not have unlimited attention, and are prone to (quite literally) judging a book by its cover. Knowing this, it is the imperative of writers, brand marketers, and all communication professionals to simplify. Less is more.

Here’s what communicators can do:

  1. Communicate with the non-average audience. We always think about the average audience and plan products and communications according to their expected intelligence level. But, as Rory Sutherland suggests, it is the extreme audience that we need to think about [6]. So, when planning for communication, to put it colloquially, think about how you would explain it to your grandmother. If it is simple enough for her, it is simple enough for everyone and you have hit the nail on the head.
  2. Avoid acronyms and big words. I stay in Singapore, a city that has a particularly high penchant for acronyms. IKR, I am SMH RN. (For newbies, I just said, “I know, right, I am shaking my head right now.” Keep up!) If we ever did a quick back of the envelope calculation on time saved by using an acronym and man-hours spent on explaining acronyms, my hypothesis is, the latter would outweigh the former. So, next time, audit your communication to ensure there are no unnecessary acronyms. In the same breathe, may I also suggest editing out big words? 
  3. Draw instead of write. There is considerable evidence suggesting illustrations and visuals are far more effective than text in the learning paradigm [7,8] — and if it works in learning, it works in communication. If you can replace text with visuals, you are bound to improve the fluency of the communication. 

As Mark Twain once famously quipped, “I apologize for such a long letter – I didn’t have time to write a short one.” Like most of Twain’s jokes, it reflects a relatable truth: it is definitely not easy to write simple, short, and effective communication — but we owe it to our readers to at least try.

So, this year, pledge to objectively streamline erudite communications to  focused, directed vocabulary or in other words, Keep It Simple, Stupid.

TDL Study: Improving Financial Decision-Making

Decisions about money can be difficult – they are often abstract, require us to imagine our future selves and can be typically driven by emotions. Whether they are about what brand of cereal to buy, how much to save for retirement, or what our next car should be, we are constantly bombarded with hard money choices. It’s easy to get caught up in the details of these decisions and allow them to stress us out. Unfortunately, this stress makes us more irrational. The problem is, Americans are finding it more difficult than ever to focus on our long-term goals. This is why we embarked on a study to find ways to help improve financial decisions under stress.

The Decision Lab teamed up with Capital One to uncover simple ways to reduce the effects of stress on our financial decisions. In particular, we focused on how thinking about the big picture can affect financial decisions under stress. Typically, stress causes people to get stuck in details and ignore long-term impacts. So, we wanted to see whether a quick mental exercise could reverse this effect and make people better with money. To do this, we ran a study with 1,011 nationally-representative Americans.

We found that ‘bigger-picture’, abstract, thinking styles led to healthier financial behaviors. Abstract thinking means focusing on the broader situation rather than the details. In particular, thinking about why we might do something instead of how we might do it causes us to be more rational. Taking that perspective lets us feel more in control of our finances, budget better, save more—and ultimately achieve more of our financial dreams.

Quick Exercises to Develop a Smart Money Mindset

1. We can make better decisions by focusing on what’s most important to us.

Too often we get stuck on small details instead. Even when I’m not thirsty, sometimes I find myself checking out all the different flavours anyway—even though I don’t need anything! When we keep the big picture in mind, we make better decisions with our money. One trick to overcome this is to choose a moment in your buying process where you make it a habit to reflect on the big picture and your values. For example, as you’re lining up at the supermarket register, I look at my shopping cart and ask myself: does this reflect my values as a person, and does it get me where I want to go?

2. Learn, forgive yourself, move on

When we make a mistake, we often beat ourselves up over and over again every time we think about it, dragging the bad decision around sometimes for weeks or more. This increasingly discourages us, increases our stress, and ultimately makes it harder to make the right choices in the future. Instead of beating yourself up, be kind to yourself. Once you’ve realized what the mistake was, forgive yourself and move on. You’ll know better next time, and forgiving yourself and managing your stress levels will help you to make better decisions down the road.


The AI Governance Challenge

3. Choose the moment wisely

Stress makes it harder to make the right decision. It’s hard to lower our stress levels in the moment, but we can choose our moment wisely. When we’ve got a big decision in front of us, it’s helpful to stop and check our stress levels. “Do I feel calm or anxious right now? Is my mind clear or racing?” If we’re not in the right mindset to make the decision, it’s usually best to walk away from it for a little while, then come back to it when we’re ready. Over time, we might also notice patterns to our stress levels—maybe we’re usually less stressed in the morning after a night’s sleep, or maybe we’re usually less stressed in the evening when the day’s work is done. Choosing the right moment to make a big decision is a great way to keep stress from getting in the way of the right choice.

These tips can help us all make better choices with our money. When we’re stressed, it’s harder to make the right decisions, but by focusing on the big picture and choosing the right moment to make a big decision, we can take the bite out of stress. A few good decisions can help to get the ball rolling, which takes off the pressure and helps with stress. Small changes become better habits, and ultimately help us to get ahead.

The study can be consulted or downloaded via this link.