Korea’s CSR Strategy: An Interesting Mix of Profit and Social Change

A car company that is increasing market share and keeping taxi drivers healthy by establishing fitness centers at gas stations. A consumer packaged goods company that increased sales over thirty-five percent in one year by creating jobs for retired nurses who provide services and sell care products in facilities for seniors. A corporate foundation that makes a profit by investing in social enterprises rather than making donations to charities.

Last week, I was in Seoul to participate in the SK Happiness Foundation’s 10th Anniversary Celebration and had the opportunity to hear about some remarkable initiatives such as Hyundai’s Energizing Project for Taxi Drivers, Yuhan-Kimberly’s Active Senior Program and the Happiness Foundation’s own focus on investing in social enterprises: all examples of how some corporations in South Korea are profiting from social change—and how that country may be outpacing western businesses in this area.

The question of which comes first—business or social change—seems to be a dilemma that is exclusive to corporations in the west.

Unlike corporations in the west, Korean businesses tend to approach social change from a purely profit-based perspective. The question of which comes first—business or social change—seems to be a dilemma that is exclusive to corporations in the west. Without the need to always achieve this equilibrium, decision-making becomes much easier: if it doesn’t make money, it just doesn’t get done.

In addition, our approach to connecting business with social change is based on addressing the priorities of a wide range of stakeholders including employees, business partners, shareholders, government regulators, advocacy groups and consumers. However, gaining a consensus among such a broad range of stakeholders is costly and time consuming. Korean companies believe it’s critical to understand the social issues that matter most in their country, but they have a bias for action that isn’t slowed down by the need to get “buy-in” from all stakeholders.

Businesses in Korea with profitable social programs don’t broadcast their initiatives nearly as prominently—perhaps because they don’t need to.

The ways in which Korean companies communicate social programs is also very different. Western-based global brands such as Starbucks and Unilever have done a remarkably good job at telling their social stories—think about 100,000 Opportunities and the Dove Self-Esteem Project. Businesses in Korea with profitable social programs don’t broadcast their initiatives nearly as prominently—perhaps because they don’t need to.

In Korea, social enterprises are just as important as the efforts of large corporations. The SK Group’s Happiness Foundation invests in and operates new businesses that contribute to social change such as Happy After School, a for-profit program designed to improve the effectiveness of after-school education. “The Happiness Foundation focuses on social enterprises, an innovative model that addresses social problems by tapping into corporate mechanisms, and supports the creation of a social enterprise ecosystem,” said Chey Kee-won, President, The Happiness Foundation.

Ironically, while corporate social responsibility is primarily thought of with respect to western businesses, companies in Korea may be getting the upper hand. In addition to the challenges of competing on brand, price and quality corporations in the west will soon be competing in the area of social change.

“The Happiness Foundation focuses on social enterprises, an innovative model that addresses social problems by tapping into corporate mechanisms, and supports the creation of a social enterprise ecosystem.

Why are Korean companies getting such enviable results, and what can we learn from them? Based on what I saw in Seoul last week, I’ve developed four practical ideas to help corporations make their investments in social change both more effective and more profitable.

1. Assess opportunities based on profit potential

The goal should be to begin with a business problem and then assess the potential to establish a social program – not the other way around.  Every significant investment should be supported by a business case and have a clearly defined path to profitability over a three-year period.

2. Focus on the stakeholders who matter most

The most effective approach is to engage internal leaders and managers, issue experts and the people directly affected by the issue. Employees, consumers and other stakeholders will support programs that are endorsed by experts and based on genuine needs. Try establishing an advisory council comprised of internal leaders, social issue authorities and community members.      

3. Identify ways to be more entrepreneurial

Large corporations are risk-averse and bureaucratic but there are ways of speeding up the pace of change and acting more like a start-up. For example, try designating an internal team to crack a business problem using a social solution and reward them with a share of the profits based on achieving clearly defined targets. In 2010, Hyundai launched Easy Move Inc. the first social enterprise in Korea to produce and sell vehicles and walking assistance equipment for the disabled and elderly.   

4. Invest in social enterprises

When it’s not possible to make your organization more entrepreneurial consider investing in an external social enterprise. For example, Yuhan-Kimberly’s program for seniors is executed in partnership with entrepreneurs who do business with this market segment. The corporation has partnered with small businesses that produce products such as fashionable walking sticks, reading glasses and shoe inserts.

The companies I met with in Korea acknowledge that they also have much to learn from their western counterparts. In particular, the way that social programs are communicated and the emerging emphasis on the measurement and evaluation of social change. However, it’s also clear that some Korean companies are much farther ahead and that businesses in the west need to catch up in an area that has become a new benchmark of success around the world.

This article first appeared on Canadian Business
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Paul Klein is the founder and CEO of Impakt, a B Corp that help corporations profit from social change.