Redesigning Corporate Responsibility
How Digitalization changes the role companies need to play for positive impacts on society
Von Nicolai Andersen, Chief Innovation Officer Deloitte
- Corporate (Social) Responsibility
- The Impact of Digitalization
- From CSR to CDR
Digitalization has made significant changes on the daily lives of billions of people around the world, thus on societies. Given the increasing speed and increasing complexity of technological progress, the not-so-far future will show even greater changes through Digitalization, leading to chances but also challenges for societies. For a long time, companies have managed their responsibility to society and environment through Corporate Social Responsibility programs – not always at highest strategic importance. Digitalization creates a chance for companies to rethink their corporate responsibility and take different approaches, even capitalizing on some of the business opportunities resulting from these challenges. Digitalization however does not only create a chance, but also a responsibility for companies to fill gaps that education and regulation cannot and should not fill anymore. Companies should treat this Corporate Digital Responsibility with highest strategic priority, helping to create positive futures not only for their business, but also for the societies they are part of.
My daughter is 11. Since about one year, she owns a smartphone with theoretically unlimited and unrestricted access to the internet. My wife and I had decided that the right time to be “old enough” for a smart-phone would be the transition from primary school to secondary school. We saw it as our responsibility to allow her to be part of a digitalized social life on WhatsApp, Snapchat & Co.. We saw it as our responsibility to allow her to become digitally literate. And we saw it as our responsibility to allow her to make use of the convenience of digitally assisted life.
Positive developments occurred. My daughter has contributed great works of digital art to our family photo-collection. She recently helped us understand the entire Greek and Roman mythology through instant research in the ruins of ancient Greece. And she asks her father in real-time for advise when she wants to buy a dress or tries to fix her broken bicycle.
But of course also negative developments occurred. Like so many other kids, she also spends more time chatting with her friends than actually talking to them. She developed an addiction to mobile games, sacrificing her time on more creative leisure activities. And she learned the hard way, that there is no such thing as free lunch, that getting something for free requires giving something in return – in most cases of the digital world personal data.
The functionalities of today of the smartphone of my daughter are not the functionalities of tomorrow. Looking into the future, technological progress on her smartphone will occur, that could be considered positive or negative – depending how you look at it. Many researchers believe that digital technologies continue to develop at the pace of “Moore´s Law” or above, which would mean an exponential development (Shingles 2016). Or in easier words: The change we saw within the last 12 years, is the change we will see in the next 6 years. Looking back 12 years ago takes us before the market entry of the iPhone, thus before we all could even imagine what Apps would do to our day-to-day lifes. The same change, that we cannot imagine today, will occur to our lives in the next 6 years. Before my daughter turns 18.
Is it just the responsibility of me as her father to make sure that digitalization affects my daughter only in positive and not in negative ways? Is it the consumers, employees, citizens that have the responsibility to create positive impacts on their society through Digitalization? Or is it the responsibility of governments to regulate Digitalization in a way that it only creates positive impact on society? And what roles should companies play?
The intention of this article is to take a closer look on the responsibility of companies for positive impacts of Digitalization on society, considering the increasing speed of change and growth of complexity of digital technologies.
Corporate (Social) Responsibility
Viewing companies as responsible for positive impacts of their business is not a new concept. It has long been discussed and in parts being executed by companies under the umbrella-term ‘Corporate Social Responsibility’. In one of its wider definitions, CSR is seen as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” (Moir 2001).
There have been numerous discussions on why companies actually should invest in CSR programs, including the view of CSR as a part of creating stakeholder value and thus shareholder value (Hübscher 2015). Benefits from acting socially responsible - amongst others - include talent-attraction, public image, process efficiency and employee loyalty (Shingles 2016), as well as creating new market opportunities, enabling proactive regulatory relationships and building resilient sustainable supply chains (Mennel 2015).
Despite these positive impacts on company’s own benefits , investing strategically into social responsibility is not a given. A Deloitte study examining the social impact practices of the 2014 Fortune 500 global public companies revealed four business archetypes:
There may be differences in the percentages in each of the archetypes, if you take different samples, depending on size and country origin of companies. Some companies just have a different corporate social performance depending on specific environments, stakeholders and local issues (Moir 2015). But it still has to be concluded that corporate social responsibility for the majority of companies is not perceived as being of highest importance for a company´s strategy.
The reason to that may reside in the two dichotomies that according to Hübscher (2015) lead to CSR being treated in a rather reactive and residual way, versus treating CSR strategically:
- The dichotomy between responsibility for the economy vs. responsibility for society
- The dichotomy between goals for the economy vs. goals for society
Only if these dichotomies are cleared, companies would consider CSR as way to creating positive shareholder value and thus would invest in it in a noticeable way, argues Hübscher.
As Digitalization is completely redefining not only the products and services landscape, but leading to radical changes in economy, society, politics and even our values and believes (Gärtner 2018), does this create a chance to also clear these dichotomies and radically change the way companies approach their own responsibility?
The Impact of Digitalization
Uncountable publications have been written, uncountable public discussions have been held about the good impacts and the bad impacts of Digitalization. Digitalization is driven mainly by the combination of the increase in available data and the ability to access and process this data, leading to new ways to produce, to consume, to work (Gärtner 2018). These “new ways” are often considered as innovations. And these innovation in many cases lead to chances and challenges at the same time (Müller 2017). Take intelligent algorithms processing granular data on communication patterns: They could lead to a higher crime prevention rate, but could restrict the freedom and privacy of individuals and could affect the culture of a society.
Digital Innovations have already changed our lives in both positive and negative ways. Positive developments of Digitalization undoubtedly are the comfort of being able to access information and services 24 hours a day, 7 days a week. The comfort of individualizing what, how and when we consume products, services and information. The comfort of being able to afford more because of decreasing product costs and increasing price transparency. The comfort of taking part in each other´s lives through easily sharing visual and acoustical experiences e.g. the video message of my daughter to her Grandma from one end of the world to the other.
And at the same time there is current developments that are undoubtedly negative: The case of the last US presidential election has shown how processing of granular personal related data in connection with automated content generators and in connection with so called “Fake News” have led to content bubbles of perceived truth. These may have actually influenced voters’ behavior and ultimately may have affected the outcome of the election (Voigt 2018).
As root cause of this - but also as separate negative development - can be seen the so-called “digital divide”, the gap between those who take part in digitalization and those who do not. There is a yearly survey in Germany analyzing the degree of digitalization of the German population taking into account four categories (D21 2018):
- Digital access (Internet use at home / at work, available equipment)
- Digital use (Variety of applications used, average usage time of the internet)
- Digital competence (Knowledge about digital topics (eHealth, cloud, …), technical competence)
- Digital openness (Mindset towards the use of the internet and digital devices)
These categories lead to a score between 1 and 100, where people with a score <20 are considered as “Offliner” and people with a score >80 as “Technology Enthusiasts”. The 2017 score for Germany is 53, which does not say much without taking a look at the gaps between certain parts of the population:
If there is positive and negative changes through Digitalization to our lives today, how about the development in the future? How will our lives be affected, when the exponential advancement of technology, as discussed before, leads to new applications of digitalization that we can hardly imagine? Will the future be as positive, as described by the visionaries of the Silicon Valley, who see technology as the way to solve humanities greatest challenges (Diamandis 2012)? “The financial services industry, for example, might explore new ways for Blockchain to democratize banking, enable micro-transactions, and simplify philanthropic donations. The consumer food industry could potentially leverage biotechnology to change the health benefits profile and affordability of their products. The entertainment industry might partner with educational leaders to leverage advances in augmented and virtual reality to revolutionize learning and education. By supporting the maker movement and exploring new ways to leverage 3D printing, manufacturers could help provide affordable housing and basic necessities to the world’s underserved populations. Hospitals and the health care industry have opportunities to use digital medicine to reinvent and democratize prevention, diagnosis, and treatment.” (Shingles 2016).
These future visions sound desirable, and in the stated examples maybe do not even have negative downsides. But how about a future vision of every human having a chip implanted in the brain, connected to our mobile phones. No, not for mind-reading and -writing purposes. This functionality may be still far out in the future. But in the nearer future we could already be technically able to offer a very useful functionality that could save lives: My daughter walks down the street, only focusing on the screen of her mobile phone, not watching the world around her. She does not notice the red light crossing the street and the truck approaching at high speed. Her mobile phone could detect the approaching vehicle, predict the likelihood of an accident and then send a signal to the chip in my daughter´s brain that triggers an impulse for her to jump backwards. Surely a useful functionality, but is this a positive future or a negative future?
From CSR to CDR
Digitalization undoubtedly creates chances for positive futures of societies. These chances cannot and should not be realized by governments alone, but should be also realized by companies - with the side effect of capitalizing on the business opportunities of these positive futures (Shingles 2016). But at the same time Digitalization creates an increasing degree of responsibility for politics and the economy to prevent negative side effects on our societies (Capurro 2017).
These considerations have led to a discussion in the recent past, whether there is a general responsibility for companies resulting out of Digitalization: Corporate Digital Responsibility (CDR). There is no common definition on CDR yet. CDR is seen as differently as:
- Extension of classical CSR into Digitalization: The responsibility of companies to act with discernment within and outside their boundaries when applying digital business processes, creating digital services & products and interacting with employees, business partners and society (Mühlner 2017)
- Application of ethics in Digitalization: The responsibility of companies to embed ethical considerations at company, individual and societal level (Raivio 2018)
- Creating trust of societies towards Digitalization: The responsibility of companies to create transparency on the use of data, algorithms and bots to increase the level of trust of society in digitalization (Osburg 2017)
- Creating trust of consumers towards Digitalization: The responsibility of companies to keep and increase the level of trust consumers have in the use of digital applications (Thorun 2018)
- Solving problems through Digitalization: The responsibility of companies to help leverage digital technologies not only for their own benefit but for driving greater good in society (Shingles 2016)
In summary the existing definitions of Corporate Digital Responsibility agree in the aspect that CDR is not just using digital technology to be more efficient and effective in managing CSR. But the definitions seem to differ in two dimensions:
- Stakeholder Dimension: Just the consumer of a company vs. stakeholders of a company (consumers, employees, business partners) vs. wider group of stakeholders (society in general)
- Impact Dimension: Primarily preventing negative developments of a company’s actions vs. primarily achieving positive developments through a company´s action
For this article – and I suggest also for any further discussion and implementation of Corporate Digital Responsibility in companies – CDR should be considered in the widest possible definition: Corporate Digital Responsibility is the strategy and execution of a company to prevent negative impacts and achieve positive developments from Digitalization on the entire society. While this definition may be academically easy to take on, it is in reality an umbrella-term for at least four completely different mindsets regarding CDR:
Looking at the four different types of “CDR-Mindsets”, the dimensions lead to two different possible trade-offs however:
- Stakeholder Dimension: The trade-offs between the responsibility of a company for its own consumers versus the responsibility of a company for society in general. The example of eCommerce illustrates this quite well: Delivery of goods with lowest possible costs in the supplychain creates value for consumers, because all-in prices for consumption will go down, ultimately leading to higher standard of living of the consumers. But due to the negative effects of last-mile delivery (e.g. increase in city -traffic, decrease of achievable income for deliverydrivers) creating negative effects for the standard of living of the overall society
- Impact Dimension: The trade-offs of between the responsibility of a company to create positive impact versus the responsibility of a company to prevent negative impact from happening. Examples for this – which leads us into the ethical discussion of the next section of this article – are any kind of digital applications that help to optimize daily life situations by processing individual personal data. Our car may warn us about an icy part of the road just ahead of us, taken from data of another car on the same street. This would motivate us to slow down, ultimately leading to a decreased probability of a car-crash. But this requires cars to send individualized granular data to a central processing mechanism, decreasing data-privacy and increasing risks of data-protection violations
We need to be aware of these trade-offs in general but especially in specific daily-life situations to be able to take first steps at implementing Corporate Digital Responsibility programs on company and more importantly country-level.
Corporate Digital Responsibility in our daily lives
To be able to debate the CDR trade-offs in daily life situations, we need to take one step back to define a framework for our digital lives. According to Müller (2017) we need to distinguish four different aspects of Digitalization that are causing challenges:
- Datification: The ability to generate and process an increasing amount of granular data. This leads to the possibility to generate specific insights for a higher the degree of individualization with the downside of a centralization of these insights outside of control of the individuals
- Automation: The ability to take automated decisions based on algorithms. This leads to the possibility of quicker and more fact-based decisions with the downside of possibly losing control on the question what is right or wrong, e.g. discrimination based on facts
- Connection: The ability to exchange and combine data from “things”, e.g. sensors. This leads to the possibility to virtualize and remotely control actions with the downside of losing a sense of responsibility for the effects of the action
- Interaction: The ability to have machines work together with humans. This leads to the possibility of fulfilling tasks more comfortable and easier and even less dangerous with the downside of possibly eliminating jobs and / or personal relationships
These trade-offs in the four aspects of Digitalization according to Müller are actually existing ethical trade-offs applied into the new realities and/or opportunities caused by Digitalization:
- Trade-offs in values:
o Accessibility vs. Privacy, e.g. mobility data to optimize public transport
o Individualization vs. Privacy, e.g. user behavior data to optimize products & services
o Customer Experience vs. Objectivity, e.g. nudging to motivate behavior
- Trade-offs in interests:
o Insights vs. Privacy, e.g. pharmaceutical / medical research on personal health data
o Security vs. Privacy, e.g. crime-prevention through tracking and storing of personal data
- Trade-offs in consequences:
o Short-term benefits vs. long-term risks, e.g. automation of tasks in work-profiles
o Option 1 vs. option 2, e.g. prioritization of digital infrastructure investments
To understand and discuss these trade-offs, Müller suggests to view them in the context of various areas of living: Learning & Education, Health and Personal Care, Communication, Mobility & Logistics, Work Life and Private Life.
There are uncountable trade-off decisions in daily lives. In many cases, companies have to take the decisions for their consumers, for their employees and for their business partners with impact on wider stakeholder groups or society in general. Or they have to help consumers, employees and business partners to take decisions in full knowledge of possible consequences. Referring back to the definition of CDR taken in the last chapter, I would like to extend this view even further: Companies should see themselves responsible to help all members of a society – including governments – to take the right ecisions in trade-offs caused by Digitalization affecting our daily lives.
For me personally this would mean…
…in my role as a consumer: the responsibility of companies to develop digital products that increase the quality of my life. And the responsibility to explain to me in easily understandable words, what data & algorithms they use for what purpose, what advantages this brings to me and what risks.
…in my role as an employee: the responsibility of companies to make my job with the help of digital assistants as easy as possible and paid with a fair salary. And the responsibility to keep on educating me so that I can switch into a different job-profile even at a higher age, when my original job has been replaced by a machine
…in my role as a citizen: the responsibility of companies to make as much information available to me as possible to enable me to make self-determined decisions. And the responsibility to value the functioning of a free and open society based on a democratic system higher than the value of the own stock price
…and - last but not least, ending my consideration to where I started off at the beginning of this article – in my role as a father: the responsibility of companies to close the gaps of the digital divide and improving overall digital literacy especially of the younger generations. The education system cannot be blamed for not being able to teach our children every aspect of Digitalization, given the increasing speed and complexity of change through Digitalization as discussed before. I would like to see the education system teach my daughter the principles of humanity to be able to consider ethical questions for herself. Companies should take responsibility to protect my daughter from negative impacts of digitalization through open & honest explanation of context & consequences. And at the same time they should take responsibility to excite my daughter for the chances Digitalization is creating.
Corporate Digital Responsibility can improve the overall wellbeing of societies through Digitalization. This requires a complete re-design of institutions and - in order to achieve this - an entirely different mindset in politics and society on the role of companies and inside the companies on their responsibility.
It is not the responsibility of my as father alone to help my daughter benefit from Digitalization. It is the responsibility of all of us.
About the author
Nicolai Andersen was first exposed to Artificial Intelligence at the age of 15, when he tried to teach his Atari 1040 ST to think like a human through a BASIC program. That did not work out. In the 1990s he studied Business & Engineering at the Karlsruhe Institute of Technology and took courses in Genetic Algorithms for a second attempt at creating real AI. Again it did not work out.
In the meantime, he is heading The Deloitte Garage and serving as Chief Innovation Officer of Deloitte in the EMEA region. Through these roles, he is exposed to the question of how AI and other Tech Trends might replace our jobs – or how they could actually create new business opportunities. Even more importantly, he is exposed to the following question: How can you transform a traditional corporate environment into a platform for innovation? This is much more about the human side of change than the technological side of change.
Nicolai thinks it is very important to build the future on the fundament of a well-educated society. He is a member of the board of “Initiative D21” and leads their group working on “Ethics in the digital world”. In his free time, he also likes to build fantastic desirable futures together with his four daughters and tons of Legos. And he loves to let his thoughts take journeys while he plays music or runs through the mud.
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