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Patrice Tanaka, CEO of a values-based public relations firm in New York, gave a marvelous and
inspiring address on corporate social responsibility at our GOODBusiness conference in the fall of 1998. She
has allowed us to share it with our readers. I hope it will give you all something to think about.
By Patrice Tanaka, CEO & Creative Director of PT&Co.
GOODBusiness Conference, Beaverton, Oregon
October 13, 1998
It's an honor to be invited here today to talk about PT&Co.'s work in the growing field of
Corporate Social Responsibility or CSR.
Our CSR-related efforts at PT&Co. involve two distinct but inter-related areas: 1. Our ongoing
work to live up to Inside PR magazine's description of PT&Co. as "an agency that blends its
commitment to excellence on behalf of clients with an equally passionate commitment to nurturing
its employees and making a contribution to the community in which it operates." 2. PT&Co.'s
cause-related marketing practice which includes work for clients such as Avon Products ,Liz
Claiborne and the Coors Brewing Company.
Because PT&Co. is in the PR business it should come as no surprise that we have leveraged our
CSR-related efforts to market our agency We have also helped our clients do the same. One of the
reasons I've been asked to speak to you today is, in fact to discuss our agency's success in using CSR
initiatives as a marketing tool.
But, it would be cynical or simplistic to assume that I think PR and other marketing considerations
should drive a company's CSR-commitment In fact, PR should be subservient to three other issues
and specifically to the "why" "what" and "how" of CSR involvement.
Once you answer these questions in a way that makes sense for your company getting credit for good
deeds.. will be both easier and more rewarding than you might imagine.
Let's tackle the "why" part first: Why should a company divert time money and other precious
resources from its main line of business and reallocate them for doing good? After all the Nobel
Prize-winning economist Milton Friedman has argued that "the business of business is business."
Nor is doing good very compatible with the financial markets' current obsession with "maximizing
shareholder wealth" and "profit maximization" In fact, "doing good" is in direct conflict with
these things.
Now, some people devise tortured arguments to demonstrate how "doing good" enhances or
preserves "shareholder wealth" and "profit maximization" at least in the long run. This is called
the "enlightened self interest" argument. I will not make that argument today I won't even try to
justify the case for doing good in terms of the assumptions upon which Mr. Friedman and today's
financial markets apparently operate. That would only reinforce those assumptions.
I am here today to do the opposite: to challenge those assumptions by asking you to give some
thought to this question: Why does a company exist in the first place? Let me give you my short
answer before explaining it: A company exists to identify and meet the specific needs of its
customers.
Let me illustrate this point with some concrete examples. Let's start with a category of companies
that people love to hate these days: HMOs. It's hard to think of any other group of companies not
even tobacco companies that is as widely and passionately vilified by Americans today as HMOs.
Though they've been a major force for less than a decade HMOs have already become an almost
Kafkaesque stereotype: bureaucratic unresponsive insensitive inept greedy.
It wasn't until I read a recent Forbes magazine interview with social observer Peter Drucker that I
really understood why: Drucker attributes the inability of HMOs "to do the job right" to their
focus on minimizing healthcare costs rather than maximizing healthcare. Ironically despite this
objective of minimizing healthcare costs many HMO providers have run into financial difficulties
I would argue that this emphasis on cost control lies at the root of these difficulties. It's not that
cost control isn't important to the health of a business. It's when it becomes a primary objective
rather than a strategy or a tactic that the troubles begin. The pursuit of internal needs such as "cost
control" as an objective undermines a business' very reason for being that is: to meet the needs of the
customer. It is a self-defeating proposition.
Let's compare the HMO approach with that of another company in the healthcare industry:
Merck & Company, Inc. Speaking in 1950, George Merck II said (and I quote): "I want to express the
principles which we in our company have endeavored to live up to. We try to remember that
medicine is for the patient. We try never to forget that medicine is for people. It is not for profits.
The profits follow and if we have remembered that they have never failed to appear. The better
we have remembered it the larger they have been." This is a noble sentiment but does Merck "walk
the talk?" Listen to what the January 12, 1998 issue of Fortune magazine has to say about the
company that routinely appears near the top of the magazine's list of "The 100 Best Companies to
Work For in America" And I'm quoting directly here "The corporate credo is to put patients before
profits and that sense of mission permeates the drug company's culture Merck provides a low-cost
anti-AIDS drug and gives away a medicine in developing countries that prevents river blindness."
A similar approach can be found at another leading healthcare company: Johnson & Johnson. As
far back as 1935 the company's founder, Robert W. Johnson, laid out a five-point "Credo" that is
still followed by the company today. That credo puts the customer at the very top of its list of
constituencies by proclaiming that: "Our first responsibility is to the doctors nurses hospitals
mothers and all others who use our products." The Johnson & Johnson Credo goes on to list the
company's other constituencies in order of importance, including:
2. employees
3. management
4. the communities in which Merck "lives" and, at the very bottom
5. stockholders.
That this 63-year-old Credo is still followed by J&J was dramatically illustrated in 1982 when
someone outside the company laced bottles of Tylenol with cyanide. Although the deaths that
resulted from the contaminated product were limited to the Chicago area J&J took the drastic step
of recalling all Tylenol capsules from the entire U.S. market at a cost of $100 million. J&J's
response to the crisis is now considered the PR industry standard. for effective crisis management.
But J&J's management of the Tylenol crisis was much more than a savvy PR strategy. It was the
direct organic end result of the company's 63-year old commitment of putting the customer first. It
was this founding long-standing commitment to Corporate Social Responsibility that made the
company's response leverageable from a PR point of view.
As an aside I want to point out that despite the precedence that both Merck and J&J give to
customers over stockholders and despite the current turbulence in the global financial markets the
respective stock prices of these two companies are down only a small percentage from their
impressive 52-week highs. I hope that the examples I have just given you support my answer to
the question I asked you to consider earlier: "Why does a company exist?" It is: "To identify and
meet customer demands." If so then the "why" of "doing good" should, I hope, be obvious because it
is the logical consequence of putting the needs of customer first. Practicing CSR in the workplace,
for example, usually results in better customer service. Taking a CSR approach to communities has
a positive effect on the welfare of the customers who live in those communities.
Now, before moving to the "what" of CSR let me give you one last example: The General Motors
Corporation. Once considered anicon American company GM brought in Peter Drucker as an outside
consultant 1943. After studying GM from the inside for a year, he advised the company to:
· change its policies on employee and customer relations;
· consider more strongly the "public interest" in its strategy; and
· exhibit "social responsibility."
Rather than listen to Drucker's advice GM denounced it at the time as and I quote "an attack on the
company as hostile as anything ever mounted by the left." What has followed in the ensuing
50-odd years of GM history has been a number of image-eroding setbacks, including: recurring
strikes and other labor problems quality control problems serious challenges to the company's once
unassailable market leadership and negative PR such as the documentary "Roger & Me" which
used then-CEO Roger Smith's inaccessibility to lampoon the company's mishandling of layoffs
and plant closings. Ironically, GM did eventually use Drucker's advice to create its Saturn
division. PR efforts to leverage Saturn's CSR-oriented approach to employees, customers and the
community have as a result, been very successful.
I hope you agree that Corporate Social Responsibility is an integral part of the "business of
business." If so, then you and your company are ready for the next step: deciding what kind of CSR
initiatives make the most sense in terms of your business your customers and, yes, your public
relations.
Let me use our Liz Claiborne client as an example. Founded in the 70's the company already had a
good CSR track record when we first took them on as a client in 1991. The Liz Claiborne Foundation
was established early on to handle traditional corporate philanthropy efforts. In the workplace
the company gets high marks from watchdog groups for the advancement of minorities and women.
The company also abides by the White House Apparel Industry Partnership "Workplace Code of
Conduct" covering wages child and forced labor worker safety and environment of Liz Claiborne's
overseas suppliers. In other words, Liz Claiborne Inc has long understood that CSR is a necessary
part of the "business of business." When the head of Liz Claiborne's marketing team first
approached us one of her objectives was to re-establish the relevance of the brand to a new and
very different generation of women customers.
At the time, Liz Claiborne was a mature brand that did no advertising. It was no longer considered
a relevant designer brand. As a result, the brand and the company were rarely covered in the pages
of the popular women's fashion magazines. Liz Claiborne was looking for something that would
renew the brand's relevance to women of the post-feminist generation something that would
re-establish an emotional bond between the brand and its customers that would enhance the
company's overall corporate image and, ultimately, contribute to its profitability. Note, however,
that Liz Claiborne's first priority was, like Johnson & Johnson's, the customer not "profit
maximization" or "maximizing shareholder value."
In researching program possibilities that would meet this consumer-driven objective we were
struck by the findings of a Fortune magazine poll that appeared at the time. That poll showed 89
percent of contemporary adults saying that "a company's reputation often determines the brands of
products they buy." From this finding we deduced, that in the fiercely competitive fashion world
a designer brand has to resonatewith customers on a level beyond mere fashion considerations in
order to have a competitive edge. Because PT&Co. was already committed to the concept of
Corporate Social Responsibility we were keenly aware of the public's and the media's growing
interest in CSR activities.
The nationwide concern with the AIDS epidemic in the late 80's had prompted a handful
ofcourageous companies to allocate resources to battling the disease. One of those companies was
Levi Strauss an apparel company that, at the time not only had an impressive CSR record but was
headquartered in San Francisco where AIDS was having a devastating effect on the gay
community there.
We suggested doing something similar for Liz Claiborne but with two caveats: the first was that
the cause had to be something other than AIDS. Not that we didn't consider AIDS a worthy cause
But, quite frankly, too many other companies were already associated with the cause for Liz
Claiborne to be able to leverage it from a PR perspective. In other words, the cause had to be one
that Liz Claiborne could "own." The second caveat was even more strategic: the cause had to be
particularly relevant to Liz Claiborne customers as well as to the company's employees and women
make up the lion's share of both constituencies.
As part of our research we conducted an audit of potential issues considered especially relevant to
women. and which the Liz Claiborne Company could "own." One cause stood out, but it also scared
us at the same time; that cause was domestic violence. The research was certainly compelling:
· A woman is beaten every 12 seconds in this country.
· 52 percent of all female murder victims are killed by their partners.
· 60 percent of battered women are beaten while pregnant.
Domestic violence was clearly a women's issue. And this was before the O.J. Simpson murder trial
brought domestic violence "out of the closet." Before then, domestic violence was considered an
"ugly," "taboo" subject. No company particularly one connected so intimately with female beauty
wanted to be associated with such a cause. Domestic violence was a cause that needed a courageous
company to take it on.
Because it was a controversial issue and one that challenged the peculiarly American obsession
with privacy, we wanted further reassurance of its viability as an appropriate corporate cause for
Liz Claiborne. So, we commissioned a national consumer survey on behalf of Liz Claiborne. The
results of that survey revealed that:
· 93 percent of American women believed that domestic violence was a problem in America.
· That percentage was even higher ? 96 percent ? among Liz Claiborne customers.
· 91 percent of those same Liz Claiborne customers said they would have a "positive" opinion of a
company conducting an awareness campaign on the issue of domestic violence compared to 86
percent of all the women surveyed. Based on these findings we developed a domestic violence
cause-related marketing program called "Women's Work."
What I want to impress on you with this example is that because of the criteria we established
and the research we commissioned and, most of all, because of Liz Claiborne's focus on the needs of
customers, employees and the community As a result of all these things the Women's Work
program was embraced at every level of the company from top management to the company's retail
shops virtually guaranteeing its success as both a cause-related marketing program and a
leverageable public relations vehicle.
Let's look at the results of the Liz Claiborne Domestic Violence program:
· Importantly, the campaign has helped to reposition domestic violence from a "private family
matter" to what it truly is, a "public health crisis."
· More 700 million incremental media impressions have been generated for Liz Claiborne on their
involvement in the issue of domestic violence.
· The value of this media coverage is approximately $10 million in advertising equivalency and
$30 million in PR equivalency.
· The media coverage includes influential media outlets such as "The Today Show," "MTV News,"
"The Sally Jessy Raphael Show," "Live With Regis & Kathie Lee," The Wall Street Journal and
The New York Times. In addition to the incremental media coverage Liz Claiborne's domestic
violence campaign gave the brand access to the women's fashion media after years of virtual
exclusion. This includes key fashion media outlets such as Vogue, Glamour, Self, Women's Day,
Harper's Bazaar and Elle.
From a corporate image perspective the results are, I think, even more impressive:
· the Women's Work program, which continues today, has received numerous awards from
professional and watchdog groups involved in the fight against domestic violence.
· Liz Claiborne representatives are frequently invited to speak on the issue atuniversities, legal,
medical and judicial symposia, etc.
· The ultimate corporate recognition came when Liz Claiborne's former CEO Jerry Chazen was
invited to the White House to celebrate the passage of the 1996 Crime Bill which included
domestic violence provisions. Mr. Chazen was subsequently invited back to the White House to
speak on workplace violence at a press conference held by Vice President Gore.
· And, Liz Claiborne's pioneering efforts in domestic violence have inspired other corporations
such as Philip Morris, Marshalls, The Body Shop and Polaroid to get involved with the issue.
Although "profit maximization" and "maximizing shareholder value" were not the primary
objectives it is interesting to note that, directionally speaking both Liz Claiborne sales and share
price have increased since this domestic violence campaign began.
Now that I've discussed the "why" and "what" of CSR I would like to focus on the "how:" how
should a company execute CSR initiatives such as cause related marketing that makes it
leverageable from a public relations point of view? My answer is this: A CSR-related effort must
be truly effective at the CSR level first before it can ever be effective at the PR level. None of the
PR results we generated for Liz Claiborne in connection with the Women's Work program would
have materialized if the company's commitment to the cause had not been real and substantial
And, if the Women's Work program had not:
· raised more than $1 million in funds for local and national domestic violence organizations:
· produced and distributed more than 1 million posters and brochures to domestic violence service
agencies;
· generated $30 million worth of media coverage on domestic violence as part of the effort to
reposition the issue as a "public health crisis";
· and, in so doing, helped to foster legislation to help stop domestic violence.
There was a time not too long ago, however when such a partnership between a company and a
cause would have been considered unthinkable While American business individuals have always
made generous donations to worthy causes their companies were prevented by both custom and law
from "meddling in social affairs" until very recently. Peter Drucker points out that
"non-governmental, private activity in the social sphere was considered suspect for most of this
century. When, beginning from the '50's companies were finally allowed to engage in philanthropy
they had to limit their efforts to giving money and only money through in-house foundations.
Donating corporate resources such as product business advice and volunteers was unthinkable until
the 80's when it became standard CSR procedure. In addition, companies felt pressured to give to
causes least associated with their lines of business usually through united funds such as the United
Way that represented more than one cause. To have done otherwise, it was felt would have
involved business too directly in the social sphere.
All this changed in the 80's as a result of a shift in the public's perception of the roles of
government and business. By that time, people had come to understand that government would
never have enough resources to address all social problems alone. The fall of the Soviet Union
demonstrated once and for all that no government even a totalitarian one could do it all. Here in
the United States tax revolts developed in protest to government's notorious waste and
inefficiency. In the process, however, many non-profit organizations particularly those in
education lost critical government funding. At that same time, another social safety net the
paternalistic corporation was also coming undone.
Companies that had rarely or never laid off workers were now laying them off in breathtaking
numbers. Sacrosanct job benefits such as traditional pension plans and healthcare were being cut
wholesale as a way to, yes, maximize profits and shareholder value. Much of the belt-tightening
was long overdue. And it would be unrealistic to think that corporate paternalism could survive
the increasingly competitive global economy. Nevertheless, the perceived inability of government
to address social problems together with the end of corporate paternalism set the stage for the
emergence of CSR and, specifically, cause-related marketing or CRM as a marketing tool.
According to a Roper Starch Cone survey conducted in 1996:
· 76% of consumers reported that they would be "likely to switch to a brand associated with a
good cause, when price and quality are equal"? this was up 10 percentage points from 1993 when
the survey was first conducted.
· 76% of consumers believe it is "acceptable" for companies to engage in cause-related marketing ?
a 10 percentage point increase since 1993.
· In 1993, 58% of consumers were "skeptical" of CRM.
By 1996, the percentage had dropped to 21%. My point is this: though Americans have come to
accept and even expect companies to allocate resources to social causes corporate America has only
been allowed to do so for less than two decades. Perhaps not surprisingly, it was the companies
with established histories of traditional corporate philanthropy such as Liz Claiborne that were
the first to make the move into areas such as cause-related marketing. The preliminary results are
as a 1994 article in the Harvard Business Journal points out "promising" (and I'm quoting directly
here): "The outcome is not as many had feared an array of programs that benefit only business For
the first time businesses are backing philanthropic initiatives with real corporate muscle. In
addition to cash they are providing non-profits with managerial advice technological and
communications support and teams of employee volunteers.
And they are funding those initiatives not only from philanthropy budgets but also from business
units such as marketing and human resources. In the process companies are forming strategic
alliances with non-profits and emerging as important partners for social change while advancing
their business goals." One important benefit of these new strategic alliances between the private
and non-profit sectors is a newfound sense of "community" on the part of corporate America. Free
now to get involved in causes that directly relate to their line of business and their customers many
companies are gaining a new understanding of their interdependence on other parts of the
communities in which they operate. This new understanding is, in turn, affecting how companies
conceive implement and even publicize their CSR programs.
This is the case with CSR pioneer Arco. Since the early 70's, the company has worked closely with
environmental groups to identify and address specific environmental issues affecting the quality of
life of the company's consumers and the communities in which they live. This direct relationship
between a petroleum company and environmental groups was once unimaginable . The benefits of
such a relationship to Arco go beyond creating a reservoir of goodwill which the company can
draw upon when environmental accidents occur. Having invested the resources to get a real
understanding of environmental issues Arco knows how to respond to these accidents in ways that
reassure rather than antagonize environmental groups and their constituents.
Compare Arco's approach with Exxon's during the Valdez spill. With no links to the
environmental community Exxon grossly underestimated the negative impact that its perceived
lack of urgency and social disclosure would have on its image and its profits. Fundamental to the
CSR process as we have seen is establishing genuine partnerships with the constituencies affected
at both the national and grassroots levels right from the beginning. Partnerships at the grassroots
level are especially important to consumers.
According to the Roper Starch Cone survey American consumers want business to get involved at
the local level first rather than at the national or global level.
There are several reasons for this:
· First, to paraphrase Tip O'Neill: "All corporate social responsibility is local." By that I mean
that local communities bear the brunt of social problems as when neighborhoods are destroyed by
drugs and crime or towns are thrown into economic turmoil when a company closes its operations
there or when AIDS decimates entire gay communities in New York and San Francisco.
· Secondly, a commitment to a cause is often more tangible or"real" at the local community level.
Results tend to appear sooner be more visible and have greater impact.
· In the case of cause-related marketing where a part of proceeds from the sale of an item goes to
charity consumers like to know that their money will be spent in their own backyard."
Whether national or local CSR partnerships should involve the following constituencies:
1. Advocacy groups associated with the chosen cause/charity. These advocacy groups can provide
advice and guidance to companies in a number of areas ranging from dealing with the sensitivities
of the constituencies involved to facilitating relations with media people that cover the cause.
2. Non-profit groups with a track record for efficiently and fairly managing the resources
allocated by a corporation to a cause
3. National and local opinion leaders and high-profile supporters of the cause including
politicians, community boards, celebrities, etc.
There's no telling what the state of corporate social responsibility initiatives would be today had
strategic alliances between the private and non-profit sectors not been so actively discouraged for
most of this century.
As it stands now the long-delayed partnership between the private and non-profit sectors
represents society's best, if not last,hope for getting beyond the mistakes and inefficiencies created
in the past by the artificial separation of the public, private and non-profit sectors. Thank you
very much.