“The Case Against Corporate Social Responsibility,” by Aneel Karnani, associate professor of strategy at the University of Michigan, appeared this week in a special supplement of  The Wall Street Journal, produced in collaboration with MIT Sloan Management Review.

In the article, Dr. Karnani argues that corporations that focus on social responsibility will “delay or discourage more effective measures to enhance social welfare” and characterizes these efforts as a tax on shareholders.

With all due respect to Dr. Karnani, the argument he put forth is wrong. Moreover, his essay has exposed the futility of an ideological debate pitting the free market against the common good as if they were wholly separate entities.

This is not a hypothetical conversation. The world is full of real problems that threaten the corporate sector.

We face unconventional threats and irregular enemies, and we spend enormous sums at home and abroad for a semblance of security in which to conduct business.

While we may have averted a financial catastrophe, we are plagued by high unemployment, our natural resources are under siege, and our social safety nets are clearly stressed. And there are those who argue that our institutions—government, media, educational organizations, and even corporations—are not up to the task of solving these grave problems.

Dr. Karnani’s argument relies on an obsolete framework that assumes the free market requires managers to maximize profit and create enduring value for shareholders regardless of the corporation’s social impact. While this has defined the debate for the previous century, it will not and cannot define the future because of one undeniable fact: profit and shareholder value are not created in a vacuum.

The Changing Roles of Institutions
The proliferation of online and mobile communication offers myriad new tools and channels through which to debate social issues. These tools, however, do not solve problems on their own.

To understand and address the complex challenges that exist in the world today, we need a new framework of thinking and approach.

We need to recognize that the ubiquity of technology and the increasing speed at which information travels does not just shift how we communicate, connect, and collaborate but it also fundamentally changes the nature and work of the institutions that exist within our society.

The tools that empower a more active, engaged global citizenry can create new opportunities to solve old challenges when combined with reorganized and refocused institutions.

We are witnessing the rise of a more nuanced, multidimensional marketplace that is breaking monolithic entities into groups of networked individuals.

People and organizations that choose to ignore this reality and cling to their ideology will be doomed to fail. The one-to-one conversation is not between artificially constructed corporate brands and the collective populace, it is between corporate brand ambassadors (internal and external) and individual consumers. This shift requires a new framework and new approaches to profit, enduring value, and social responsibility.

Dr. Karnani’s case and two other recent high-profile editorials in The Washington Postand The Wall Street Journal assailing corporate social responsibility efforts fail to recognize this fundamental shift. But they aren’t alone. Most corporations, nonprofit groups, and government entities are trying to solve the world’s problems using structures and systems designed on past experiences, not present and future possibilities.

New Ways to Determine Value

Dr. Karnani’s argument also fails to realize profit derived from extracting value at the expense of employees, customers, and the greater social good leads only to profits in the short term, not enduring value over the long term.

Now that employees, customers, shareholders, watchdogs, and government regulators all have access to easy-to-use media tools and ubiquitous access to the Internet and handheld devices, it is much more difficult to hide from the glaring spotlight that can erase shareholder value overnight. Corporate leaders need to embrace the cleansing properties of sunlight and find new ways to create profit and enduring value for shareholders.

Dr. Karnani and I do share common ground on one fundamental point: Corporate social responsibility is a vague concept.

Like so many other worthy, and necessary, elements of corporate life in the digital age, the terminology related to corporate social responsibility has become unclear. Such a variety of practices have been lumped under the same umbrella concept that it is difficult to understand what is, and is not, part of the conversation.

Historically, corporate social responsibility programs, along with corporate philanthropy, government affairs, and cause-marketing activities, have been sequestered in different silos within corporate structures. They have been kept away from operational decision making, seen instead as a marketing opportunity or a reputation management necessity. This type of approach and thinking is inherently flawed—especially when the world is no longer about controlled messages and imagery.

Earnest concern for the common good is not a dangerous illusion; it is the cost of doing business in a connected society.

In the broadcast era, the distance between the boardroom and the kitchen table was much greater and shielded managers from the scrutiny of the community. In a connected society, how a corporation makes its profit and how it helps address wider social problems matter. The more connected we become, the more aware those who make profit possible are aware of who is adding to the social burden, who is ignoring community problems, and who is working to create solutions for them.

The Financial Opportunity of Creating Social Good
Characterizing corporate social responsibility as a tax on shareholders misses its true financial opportunity for corporations.

Effective corporate social responsibility recognizes the importance of strengthening and buttressing the community, which makes profit and enduring value possible.

The savvy corporations understanding their refocused role will not settle for lip service and lukewarm commitments. Rather, the vanguard will raise the standards of success to new heights, thereby opening the doors to exponential growth of profit and shareholder value.

For taking on their redefined role, the connected society will reward savvy corporations with sustained growth fueled by the attraction and retention of talent, intellectual property spun off from efforts to solve vexing social issues, capital influxes from socially responsible investment funds, increased value of the brand, and the invitation to enter new, burgeoning markets in need of their products, services, and social commitment.

Like the real problems facing the world, these growth factors are not hypothetical. They are real opportunities. Just ask IBM about the $3 return on investment it gets for every $1 invested in corporate-citizenship initiatives.

Do all corporations need to be socially responsible in a connected society? No, just the ones that want sustained profits and increased shareholder value.

A More Detailed Exploration:
Meaningful relationships take time and effort to cultivate. You can’t manufacture them at large scales like some industrial factory by just pushing buttons while staring at a screen. You need to get your sleeves rolled up and hands dirty to forge the emotionally rewarding personal interactions Homo Sapiens need to thrive.

An allure of social media is that it will make it easier for us to stay connected with a wider circle of people. In our quest to build our follower count, “friends”, LinkedIn connections, and page views, we have artificially increased our Dunbar numbers. Our wider reach has come at a cost that can be seen in the decreased depths of our relationships. While rich in reach, we are deficient in depth.

This is the equivalent of choosing between a plate of artisanal cheese and a case of Cheez-Its.

While a piece of aged cheddar costs more per ounce, it has a better nutritional impact and will offer an amazing multi-sensory experience.  On the other hand, you can munch on those Cheez-Its wherever you go and trick your body by filling it with empty calories.

For the past two years, I have delved into the issue of hunger in America thru my work on pledgetoendhunger.com and WeCanEndThis.com. It’s been an eye-opening experience on many levels, but perhaps the most profound understanding I have gained is that hunger in America is tied to the same root cause as obesity: nutritional deficiency.  Calories are plentiful now – what’s not plentiful is the availability of nutritionally balanced food.

When it comes to survival, calories are crucial.  Unlike the vast majority of our history, we live in a time where food is plentiful. Even 100 years ago, our ancestors were burning 70-80% of their calories in their quest to eat.  Now, we can dial a few digits and food gets delivered to us.  The only calories burned are walking to the front door.  By choosing Cheez-Its, juicy drinks, and fast food over seasonal, locally sourced balanced meals, obesity becomes a much more likely outcome.

Before anyone comes to the wrong conclusion, let me explain the title of this post. “Social Media Obesity” is a metaphor that speaks to the rising use of social media to replace real life interaction.  We cannot allow ourselves to continue down this path.  Rather, we need social media to complement and enhance our daily interactions with those around us.  It’s your challenge to figure out new, innovative ways to build and cultivate meaningful relationships that provide what we need for this new age.

It’s time to put down the Cheez-Its, gather around the artisanal cheese, and feed our souls with the nourishment they need.

What is your organization doing to promote more rich, meaningful interactions?  Or are you getting a case of the social media munchies?

Several months have passed since we gathered at the Smith School for the 2010 Social Enterprise Symposium and feasted on a variety of perspectives and ideas shared by presenters, panelist, and audience members alike.  One particularly profound perspective deserves further reflection and consideration.

In recent weeks, two separate op-eds ran in the Washington Post and Wall Street Journal deriding corporate social responsibility initiatives.  Both commentators framed their arguments around the maxim that corporations must place the creation of value for shareholders as its primary objective.  While Matthew Bishop and Michael Green offered a solid rebuttal to the two critiques, something we learned at the Symposium needs to be included in this debate.

Stanley Litow’s keynote address about IBM’s decision to center their core strategy on corporate citizenship provided substantial proof on the prudence of corporate citizenship.  What was most compelling was his statement that IBM reaps a 3:1 return on investment for their corporate citizenship efforts.

By devoting their best and brightest minds to tackling some of the world’s most vexing issues, Litow claimed IBM can trace its ROI to five sources:

Talent – recruitment and retention of their knowledge-based workforce.

Investments – IBM has seen sizeable investments in its stock from Socially Responsible Investment Funds (SRIs) that account for $1 trillion in assets and must invest in socially responsible organizations.

Technology innovation – the world’s biggest problems require new solutions and breakthroughs, many of which IBM can use to solve similar problems for their paying clients and generating revenues from licenses and patents in the broader marketplace.

Brand – the major emphasis of their advertising and marketing campaigns center around their corporate citizenship efforts and helps them stand out from their competitors

New market entry – they have found much greater success in gaining entry into new countries and regions by leading with their corporate citizenship initiatives

The ability to generate $3 for every dollar invested in corporate citizenship initiatives is important and noteworthy.  Because it is IBM making the claim, we social entrepreneurs can take great comfort in their validation of the notion that doing good can translate into doing well.

What do you think? Is this noteworthy or not worthy?

Metaphorically, the antennas on the hilltops (broadcast media) have been joined by the beacons in the valleys (social media). The former provide for greater reach, require greater resources, and are limited to one-way experiences. The latter reach smaller pockets of people, are much less cost-intensive, and are inherently conversational. Working in coordination, the two can create profound outcomes. A lack of coordination leads to detachment, confusion, and diminished influence.

At a fundamental level, we are witnessing a shift from a hierarchical communications system to a networked architecture. This shift poses significant challenges to those organizations not anticipating the broader shifts that are also required – culture, strategy, policy, structure, and staffing. Without accounting for all five elements, your organization will not be able to optimize its potential to communicate and advocate.

How is your organization addressing these five elements? Are these the right elements to address?

The era of the oversized check is over. Showing up for a community relations photo op without altering your operations isn’t enough anymore. In fact, words without action are one of your greatest risks in the networked marketplace.

Your company’s filings with OSHA, EPA, USDA and other federal government agencies have created digital footprints. Customers, employees and activists are talking about you online, and this new generation of word of mouth isn’t contained by time or distance. Sooner rather than later, this mosaic of information will be available to everyone—investors, customers, regulators, employees and competitors alike.

Are you ready for the greater intimacy and immediacy that the networked marketplace demands? More specifically, are you ready for how the networked marketplace expects you to care about broader community issues?

Thanks to ubiquitous Internet access, a proliferation of mobile devices and easy-to-use web apps, the executive suite’s relationship to the rest of the world has changed. Corporations are able to engage with their stakeholders like they’re a corner store rather than a faceless multinational. That means the days of separate silos of communication are over. Corporate social responsibility, cause marketing and corporate philanthropy can no longer operate independently as if they serve different audiences. This is especially true for companies that profit from any services or products that contribute to social ills.

It is time for a unified approach to caring, driven by an awareness that your company is part of a larger ecosystem and community. Not only have these audiences converged, their expectations of companies have changed. You need to demonstrate an authentic commitment to the social causes your company has chosen to support. And your operations need to demonstrate this commitment just as much, if not more, than your marketing and communications.

What’s the cost of not aligning operations with marketing when it comes to doing good? As Umair Haque of the Havas Media Lab stated in a recent post, “In a disconnected world, the costs of evil are minimal.” Continuing this logic, Jeff Jarvis, author of What Would Google Do?, proposed a new term: “Haque’s Law” Its meaning? “As interaction explodes, the costs of evil are starting to outweigh the benefits.”

While “evil” might seem a harsh word, social issues carry with them implicit and explicit morality. One cost of business in the networked marketplace is exposure to moral judgments from individuals and organizations at an increasingly faster pace.

The Timberland Company is an example of a business trying to move beyond just marketing. Founded in 1952, Timberland has grown into a $1.5 billion company and a leader in effectively integrating corporate citizenship and cause marketing. The company gives 40 hours of paid time off for community service to each employee each year, coordinates an annual company-wide day of service, supports City Year and other nonprofits and has committed to reaching a neutral carbon footprint in all its operations.

After years of walking the walk of corporate citizenship, Timberland overcame its hesitancy to talk about the walk and made citizenship a central theme of its marketing and advertising. In 2008, the company launched Earthkeepers, an eco-line of products, with a comprehensive marketing campaign making sustainability and corporate citizenship the cornerstone of the Timberland brand. The centerpiece of this campaign has been Earthkeeper.com, an online community integrated into all the major social media networks that draws individuals who share the same values and commitment to sustainability. In addition, the company issues a quarterly Earthkeeper report, detailing its progress toward its community goals.

Rather than hide from the greater intimacy of online media, Timberland CEO Jeff Swartz has embraced it. He is frequent user of Twitter, sharing his thoughts, ideas and reactions to what’s happening in the world. For instance, immediately following the Haiti earthquake, he traveled on a humanitarian mission organized through the company’s partnership with Yéle Haiti, a foundation started by Haitian-American musician Wyclef Jean. With company funds originally intended to support an ambitious reforestation initiative, Timberland showed flexibility in redirecting the monies to support the rebuilding of Haiti’s infrastructure.

After he returned from Haiti, Swartz shared his experience in a blog post. On the three-month anniversary of the earthquake, he accompanied former Senator Bob Kerrey and Billy Shore, CEO of Share Our Strength, on a trip back to Haiti to help scores of amputees created by the earthquake begin the process of regaining their lives.

While Timberland is not without its blemishes, those leading it realize the importance of a unified approach to social good.

A More Detailed Exploration:
To help save the endangered galvao bird of Brazil, just tweet “Cala Boca Galvao” and 10 cents will be donated to the cause. Or, not.

It was bound to happen. Our seemingly unending need to spread awareness of important social issues has led to a spontaneous prank by a loose network of Brazilians on unsuspecting Twitter do-gooders.  Watch for yourself:

In case you’re wondering, “Cala Boca Galvao” is roughly translated into “Shut up, Galvao.” Who is Galvao?
According to the New York Times, he is “Brazil’s leading sports announcer, Galvão Bueno, a man who, to the ears of some Brazilians, is a bombastic cliché machine.”  With the start of the World Cup, many Brazilians will be uttering these words many times over the coming weeks.

This faux-lanthropy campaign illustrates the power of networked people working in loose coordination with each other.  What started as a trending topic on Twitter led to a couple creatives to concept and produce the video (in 32 hours with no sleeping). Others have added their creative touches including a poster.  It’s snowballed into one of my favorite memes of the year.

One second to tweet. One second to save a life.

Genius. Pure, networked comedic genius.

If you want to join in on the fun, just tweet this out: 
Help #bra Save the Galvao Birds.  http://bit.ly/galvaocpn

A More Detailed Exploration:

Ray Chambers views visualization of his presentation

At the end of February, I had the opportunity to meet Ray Chambers following his presentation at the Harvard Social Enterprise Conference.  Of the many highly successful people I’ve met thru my fundraising days, he was one of the most grounded and humble.

Today, the Harvard Business Review published a solid profile of Ray Chambers, lauding him as the model collaborative leader.  Go read it if you haven’t already.

Ray comes from a modest background and became wealthy pioneering the leveraged buyout industry on Wall Street.  Though wealthy and accomplished when he retired, he confided that he still felt a void in his life and sought the wisdom and advice of various people.  Through a series of events, Ray realized that he felt happy and satisfied when he was helping others.

The more he gave, the more he felt fulfilled.

When Matthew Bishop from The Economist suggested he share this new found awareness with his fellow Wall Street colleagues, Ray conceded that most of them were still under the belief that increasing their net worth from $2 billion to $5 billion was the path to happiness.  With the recent subprime crisis and other corporate tragedies, I could only wonder at what cost that net worth increase would create.

As I looked around the auditorium at the hundreds of MBA students listening, I hoped for their sake and our collective sake that Ray’s insights could serve as a model and inspiration.  Here’s a guy who has turned his energies on helping to solve some of the biggest problems of our day: mentoring disadvantaged youth and now eradicating malaria.

Of the many insights he shared during his presentation, I thought this was most enlightening on a personal level:

Five Not Readily Apparent Steps to Happiness

1. Stay in the moment.
2. Step back and become a spectator to your own thoughts.
3. It’s more important to be loving than to be right.
4. Go out of your way to serve others.
5. Each morning, write down what you are grateful for and read it throughout the day.

While I’m not one to believe any is perfect, I do believe certain people can offer you an example to follow.  Ray Chambers is one person I choose as a guide for my endeavors.

Speak your mind
Who are other people redefining corporate success?

A More Detailed Exploration:
This past week, KFC was in the news for two very different reasons. The more prominent story was the nationwide rollout of the KFC Double Down – a sandwich of gluttonous proportions. Two chicken breasts serve as the “bread” and have slices of cheese, special sauce, and bacon strips as the “meat” of the sandwich. According to KFC’s nutritional statistics, the grilled version packs in 460 Calories, 23 grams of fat, and 1430 mg of sodium and the fried version weighs in with 540 calories, 32 grams of fat, and 1380 mg of sodium.

If you were watching broadcast TV this week, you would have noticed KFC’s other national rollout: Buckets for the Cure. This ambitious partnership with the Susan G. Komen for the Cure seeks to “make the largest single donation to end breast cancer forever” by donating $.50 for every pink bucket of chicken sold. While the website is impressive and puts the focus on the cause, it’s full of cause dissonance. That’s problematic as we become increasingly interconnected.

From the same web browser I viewed the campaign website, I did a few quick searches to learn more about the nutritional information of KFC buckets of chicken and the role of obesity in cancer.

Here’s what I learned from KFC.com (which currently features the Double Down wrapped in pink):

[Editor's Notes: Upon the request of KFC, I have calculated and included the nutritional facts for grilled chicken. According to KFC, the grilled version represents 25-30% of bone-in chicken sold in their stores.  That means 70-75% of all pink buckets will likely be fried chicken. Since grilled represents a material percentage of the total sales, I agreed to add this information.]

• KFC lists its nutrition facts based on individual pieces of chicken, not the bucket.
• Buckets come in 8, 12, and 15 pieces. You can choose between original recipe, extra crispy, spicy, or grilled. And you can get wings, thighs, drumsticks, and breasts.
• Assuming you like original recipe and buy a standard 8 piece bucket for your pink bucket, you’ll bring home 1,600 calories and 90 grams of fat. If extra crispy is more your style, say hello to 2,380 calories and 160 grams of fat.  Grilled will get you 980 calories and 46 grams of fat.
• If four people split the bucket, you’ll average 245 calories and 11.5 grams of fat (grilled), 400 calories and 22.5 grams of fat (original recipe), or 595 calories and 40 grams of fat (extra crispy).
• Calories from fat in the pink bucket is 41% (grilled), 49% (original recipe), and 60% (extra crispy).

Then I searched for daily nutrition guides and found this from the American Heart Association:

• Without any sides or beverages, two pieces of chicken total 14% (grilled) 22% (original) and 33% (extra crispy) of the recommended caloric intake for women age 31-50.
• For optimal health, total calories from fat should be 25-30% of your diet. Now compare that to the 41% (grilled), 49% (original recipe) and 60% that your pink bucket gives you.

According to Cancer.gov:

• “Nearly one-third of all adults are now classified as obese.”
• “The chief causes of obesity are a sedentary lifestyle and overconsumption of high-calorie food.”
• “20 percent of cancer deaths in women were due to overweight and obesity.”
• “Obese women are also at increased risk of dying from breast cancer after menopause compared with lean women.”
• “Weight gain during adulthood has been found to be the most consistent and strongest predictor of breast cancer risk in studies in which it has been examined.”

Then, I visited the Komen website and learned this:

• “Although being overweight seems protective in premenopausal women, weight gain should be avoided. Most breast cancers occur in postmenopausal women, and any weight you put on before menopause you will likely carry into your postmenopausal years. In two large studies, women were at increased risk of postmenopausal breast cancer if they had gained 20 or more pounds after age 18.”

You Can Do Better than This
While many in the cause sector might focus their outrage or contempt on KFC for this, the same scrutiny needs to be put on Susan G. Komen for the Cure. How much is that $8.5 million worth to the cause, knowing the health damage these pink buckets will cause?

The same day I came across the Buckets for the Cure, I came across boxes of cookies at the grocery store that would trigger a $.25 contribution to the local Komen affiliate. My first thought: I’m sure they’d taste great with my pink bucket.

Let me get this out in the open. I think it’s ridiculous that we even need to have a term like “corporate social responsibility” or “CSR.” What’s more meaningless than talking in jargon and acronyms?

You can’t compartmentalize doing good anymore. It’s not a department. It’s not a job title. It’s who you are and what you do, not just what you say you are.

Somewhere along the way, we collectively forgot this fact.

In the broadcast era, those running companies were detached from those who bought their products and services. Brands were created to personify the company. By their very nature, brands are artificial constructs. This disconnectedness created a numbing effect on ethics and decision-making – much like a man shaving with a face full of Novocain.

Historically, companies have used cause marketing, corporate philanthropy, and corporate social responsibility efforts to offset any negative behaviors. Interestingly, many have housed these in different silos of operations. But with the world increasingly becoming interconnected, consumers want to see brands and companies realign their cause efforts into an integrated strategy.

For this reason, companies need to be rooted in authentic commitments to doing good. They need to be alive and dynamic, constantly manifesting themselves in the individual and collective actions of company staff and like-minded partners. Their initiatives should be aligned with company culture and principles, not out there as standalone projects.

Everything about our society is changing – rapidly and constantly.
 How we communicate, get and share information, and engage each other — online and offline – is different than it was just a few short years ago.

Information moves faster, people are more closely connected, and the level of interest and commitment that people have when it comes to social issues and causes has never been greater. Our society has shifted and how companies support causes, respond to disasters, and mobilize the public needs to shift as well.

The time has come for companies to move past the gimmicks and devote more earnest efforts at addressing the root problems of our day. It’s time companies ask more of their charity partners and actually solve the causes, not just serve them.

It’s time we get real about our role in bettering the world. Are you with me?

However, I need to start somewhere, so here are five thoughts for you to ponder and discuss with me:

1. We need to shift how we view brands to match how customers view them. Brands were about image and control. Now they are about experience and impact. Ongoing dialogues, not time-specific campaigns. This is true about companies and charities.

2. While organizations have previously divided the two into different silos, this poses a great risk. Because of this shift, we’re seeing a blend of CSR and CM because of the shift in how we communicate, interact, and consume. It is vital that the CSR and CM efforts come from the inside-out, derived from an earnest commitment, not an opportunist mindset.

3. Companies are rushing into the CM space, because customers are rewarding them. However, these successes shouldn’t be blindly interpreted that every company will benefit. Superficial, brand-centered initiatives might create short-term revenue, but inflict long-term damage to the brand. With their scale and reach, companies need to be mindful of how they engage in CSR and CM. This is not to say incremental. In this real-time world, experimentation and baby steps are better than stasis.

4. Cause marketing is still marketing. The purpose of marketing is to sell more products and services. Period. Cause marketing accomplishes this goal by associating the company with a social issue or cause or charity. CM does not solve the cause. But it can help by raising its profile and offer individuals a way to help thru their purchases.

5. People can feel empowered, but the disconnection and detachment between purchase and impact is a huge void. We can view this as a failure or an opportunity. Charities face the same situation. If they cannot demonstrate impact from the donations and volunteer hours they receive, they will lag behind. In the long run, if people take action and cannot see the impact they individually and collectively made, they will shift their perception of the company and charity involved.

What do you think?