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Profitability Needn’t Be Sacrificed for Social Responsibility

There’s been a lot of discussion on our site recently about social and environmental responsibility versus cost. (See: After Supply Chain Transparency Comes What? Social Responsibility, Apparently.) In many cases, making sure a business simply complies with the various environmental laws around the globe — not to mention being a good world citizen — requires investment in time, people, operations and equipment upgrades.

I recently interviewed Charlie Denham, Manager for Corporate Social Responsibility (CSR) for global catalogue distributor Premier Farnell. As a UK-based company, Premier Farnell had a front-row view of the EU’s Restriction on Hazardous Substances (RoHS) and launched a massive compliance effort throughout its distribution operations. Premier Farnell and its US-based subsidiary, Newark, have compiled an extensive database on environmental regulations and green design practices and are a leading resource for engineers, suppliers, and customers in the electronics industry.

The distributor also practices green initiatives within its own business operations. In April 2010, Premier Farnell was awarded Platinum status for the Community Corporate Responsibility Index, one of the leading benchmarks for CSR programs. Denham discussed how Premier Farnell and Newark balance their commitment to social responsibility with the investment it takes to commit to environmental friendliness.

“Making a business operation as sustainable as possible delivers a return for shareholders,” Denham says. “There is a value attached to social responsibility and environmental considerations for both employees and shareholders of our company.”

As a publicly traded company, Premier Farnell has an obligation to be profitable for its shareholders. But the financial community, with a focus on quarterly earnings, doesn’t always reward companies that invest for the long term. Among his other responsibilities, Denham conveys the value of corporate social responsibility to Premier Farnell’s shareholders.

“The most effective way we communicate to our shareholders is that our energy bill has gone down,” he says. “And it will stay low. The issue of carbon-footprint reduction is emotive, but there are scientific reasons why investing in this effort makes sense. If you look at shareholder interests, obviously they want a profitable business. But how you communicate [the value of environmental initiatives] is you talk in terms of efficiency, savings, and how it relates to hours of electricity. We can fulfill our fiduciary as well as environmental responsibilities.”

Good environmental practices, he says, are not only about compliance — they are a competitive advantage. “If you merely focus on compliance, you are being reactive. But if you look at the future of business, we are doing work now that in 40 years will be standard business practices. The commercial landscape is changing, and companies will look at sustainable development and determine how [the electronics industry] can be the most sustainable. That means a secure future and generating ongoing value for our shareholders and investors.”

Financially, the company is achieving its goals. For its fiscal quarter ended July 2010, the Premier Farnell group’s second-quarter sales and operating profits were the highest for 10 years, according to Group Chief Executive Harriet Green. “This reflects the continued progress in our strategy and market share growth as well as the broader-based increased activity levels in the global electronics supply chain,” she said.

It appears that companies don’t have to sacrifice profitability for good global citizenship. In future blogs, we’ll talk about Premier Farnell’s other CSR programs, including human rights.

6 comments on “Profitability Needn’t Be Sacrificed for Social Responsibility

  1. SP
    October 8, 2010

    It is so true that profitability need not be sacrificed for social responsibility. Its great to see many companies support education,sport and other social causes. I know many start ups who have not yet reached the break even but still support the social cause like donation computers in public schools. I guess good amounts can be saved if we try avoiding wastage of electricity.

  2. Anna Young
    October 9, 2010

    I am trying so hard not to be selfish here. It's not easy though. When you've been trying hard to get a full time job and coming home emptyhanded it's difficult to focus on social responsibility. Yet, that's the foundation upon which our society rests and I remind myself of that frequently even at the most difficult moments. Somebody once said you can do good business while doing good. I believe this. The results may not be immediately visible but eventually it will come up. Just like that better, greater job many of us are seeking! Hope.

  3. Ashu001
    October 10, 2010

    Barbara,

    This is the quote that I liked the most in your post-

    The most effective way we communicate to our shareholders is that our energy bill has gone down,” he says. “And it will stay low

    This is the one thing that can be easily understood by most shareholders because if the Company makes profits then Shareholders benefit .So any boost to the bottomline is always welcome.

    My personal feeling is that Companies need to focus more on their communities where they operate today.What can they do (in their existing line of Business) to make their community a better place to live in?

    You don't need a CSR specialist for this.Anyone and Everyone can and should chip in.We seem to have lost that spirit of community in most Companies today.Its time to bring it back for the benefit of society at large.

    Regards

    Ashish.

  4. Ashu001
    October 10, 2010

    Anna,

    What you face is today true of so many college educated and extremely well qualified Americans.We all were told that all we needed was a Great College Degree and we would all get awesome jobs/The world would be our oyster(so to speak).

    Unfortunately reality today is not quite that.

    Please be positive,don't lose hope and keep working on developing Skills (which are most in demand with employers today) and keep searching very hard.Something good will come up soon.

    Best Regards

    Ashish.

  5. tioluwa
    October 12, 2010

    Anna Young,

    I totally relate with your pespective on this and i especially love your conclusion.

    “Yet, that's the foundation upon which our society rests and I remind myself of that frequently”

     

    I believe social responsibilites don't make business more difficult. No one in business will go for substandard goods to save cost, the long term implications will be to the detrement of the business.To me, its the same with social responsibilities. It should not be contested along with meeting business targets and making profits.

  6. Barbara Jorgensen
    October 12, 2010

    Hi Anna,

    Your comment made me think of a colleague who actually walked off a job at the Harvard Business Review because the HBR's management made a questionable ethics decision. Those were the days when you could act upon your convictions and expect to land safely on your feet. I can't say what I would do under the same circumstances. I do know that many companies are becoming socially responsible to attract the kind of talent that they believe will change the course of business in the future. I hope you and such an organization find each other in the future.

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