Not long ago, corporate social responsibility (CSR), was thought to be the province of massive companies that had the luxury to invest in goodwill programs, or had the need to soften their image as heartless monoliths.
The tenets behind CSR have become more important over the past few years as social and environmental concerns have come front and center for consumers, employees and even investors.
At its core, CSR is a business model in which organizations pledge to hold themselves accountable to shareholders as well as the public for the impact they have on society.
These companies differ from others in that they adopt a "triple bottom line" approach. They make decisions according to how their actions will impact people, the planet and their own profit, and quantify their approach in public-facing company reports, measuring their impact over time.
But they're not always doing this for purely altruistic reasons. CSR can reap big returns in public good will. It can also be a form of "tax-exempt lobbying," swaying governments and consumers to favor the business.
You might think that startups don't have the time or budget for CSR activities, but being socially responsible doesn't have to be all-consuming, and ignoring social responsibility can backfire in big ways. Below, we'll explore ways for even the smallest startups to incorporate CSR into their DNA, benefit the community and even see bigger returns in the process.
How Being Socially Responsible Can Give Your Startup a Leg Up
It's tough to make a name for yourself as a startup. Having the goodwill of potential customers, investors and — perhaps most importantly — your employees, can not only differentiate you among competitors, it can make the difference in what talent you're able to bring on.
In some cases, being able to tout a socially responsible approach can set you apart from competitors and impress investors. CSR-focused companies tend to get more press coverage in local news and more engagement on social media. That extra media presence can pay dividends and allow startups to show off their approach on social media. Some VCs are laser-focused on environmental and social causes, and even those who aren't might view corporate responsibility as a sub-component of their thesis.
"For Entidad, CSR is both foundational and a strategic differentiator," says Entidad CEO Jesus Torres. His company is focused on developing digital solutions that improve farmworkers' quality of life, creating smartphone apps that are built atop blockchain technology. (Note: I'm currently consulting for the startup.)
"The organizations we work with have built trusted brands by holding themselves to the highest standards of social responsibility. We knew from the beginning that to effectively operate in their respective worlds, we needed to do the same."
Corporate social responsibility does wonders for talent, especially right now. The pandemic, racial injustices and political upheaval are on the minds of many, and employees are looking for jobs that contribute to the greater good. In fact, 75% of millennials would take a pay cut to work for a socially responsible company. Research shows that putting money toward improving society rather than padding employee paychecks actually lowers employee wage demands while increasing productivity and retention.
Socially and environmentally responsible companies are particularly hot on public markets. By July 2020, environmental, social and governance (ESG)-themed funds pulled in $38 billion, reaching $100 billion in total assets for the first time. The Forum for Sustainable and Responsible Investment reported U.S. sustainable investing assets at $17.1 trillion in 2020, 42% higher than in 2018.
These trends carry over into everyday consumer behavior. A survey by Aflac found that 49% of consumers believe it's more important for a company to "make the world a better place" than "make money for its shareholders." Other studies have found that 46% of consumers pay close attention to a brand's social responsibility efforts when buying a product. And perhaps most importantly, 66% of customers are willing to pay more for products from socially responsible businesses. Higher margins give socially responsible startups a financial leg up while they are doing good.
L.A.-based swimwear brand KINDKINIS was built around such an approach.
"Empathy isn't just good moral practice, it's also a good business practice," founder Merilyn Lopez says. With every sale, her startup donates to Generosity.org, a nonprofit that builds wells in developing countries.
KINDKINIS also uses a cruelty-free, vegan fabric called rPET and just became PETA approved. The company has recently partnered with Wearable Collections as well, allowing customers to donate old swimsuits that Wearable converts into new yarn or fiber products.
"Our business strategy on sustainability came from knowing that the future is dependent on our collective attempts to cut back on waste," Lopez adds. This is one of the pillars that drives our desire to succeed."
How To Start
Your startup doesn't need to be built around social responsibility to make a difference and elevate your work. The first step can be as simple as donating a minor portion of your proceeds to a nonprofit that matches your mission.
"CSR is front and center and driving everything we do at Gray Whale gin. It is our why," says Gray Whale Gin co-founder Marsh Mokhtari. His company donates 1% of its sales to ocean-restoration nonprofit Oceana and environmental organization 1% For the Planet.
The key to CSR adoption is to start small. One way to approach this is to list all the activities your startup already does, then ask yourself how to convert them into more environmentally or socially responsible ones.
For instance, Gray Whale needed to source ingredients to make their gin, so opted to support small, local California farms that grew organic limes, sea kelp, and juniper berries. This choice led to other small changes, like decorating Gray Whale bottles with sustainable paint and using a 100% biodegradable cork. Co-founder Jan Mokhtari explains: "Our target market is the millennial gin drinker, and they want to make an impact with their purchases. They'll make a decision based on whether or not a product is doing good in the world."
Here a few questions to can jumpstart your thinking:
- How can we alter our benefits structure to be more socially responsible?
- What is our environmental footprint, and how can we decrease it?
- Can our product or people educate, feed, or counsel the L.A. community?
- Are there nonprofits we can partner with in a simple, equitable way?
Think about the answers to these questions with the greater good in mind, rather than just the PR it will bring to your business. If your commitment isn't genuine, it can backfire 一 not only with your employees, but with your consumers as well. Consider setting internal KPIs to actually measure how much value you've brought to certain nonprofits or communities. This can help keep your ego in check and allow your team to set more audacious goals in the future.
Remember to involve your employees in the conversation as well. Startups are known for the creative minds behind them. Startup talent is bound to dream up new ways to tie sustainable practices into everyday activities.
One easy way to get this started is to leave 2 - 3 minutes at the end of an all-hands meeting to get input or send an anonymous survey to pick your first undertaking. Putting these habits into practice early sets you up to grow your program over time.
Partner With Orgs That Impact Your Community
Want to get started quickly? Consider partnering with a nonprofit that pertains to your industry. L.A. startup founders have some of the most diverse options at their fingertips.
For instance, youth and family services nonprofit The Bresee Foundation would be an incredible partner to startups in the education, childcare or even healthcare industries. It serves central L.A. youth, combating poverty through youth and family services and gang prevention.
The Bay Foundation is ideal for companies looking to work with a local nonprofit focused on improving the environment. The staff at TBF are science and policy experts who deeply care about L.A.'s ecosystem and work to restore natural land and water habitats. (Note: I provided pro bono services for The Bay Foundation in 2020).
The Point Foundation is an excellent option for startups that want to volunteer their time as mentors. Point works to counter the high prevalence of bullying in schools and provide bisexual, transgender and queer students scholarships, leadership development, and community service.
Have any more suggestions? Let us know!