With consumers becoming more aware of the environmental and social implications of their day-to-day consumption decisions, corporate social responsibility, or CSR, is becoming increasingly important for business.
According to the CSR Journal, Millennials want to conduct business with companies that demonstrate social responsibility, sustainable manufacturing processes and ethical business practices. A 2019 survey suggested that 71% of consumers were motivated to give their business to companies committed to making the world a better place. An overwhelming percentage of employees and executives believe businesses should have a strong sense of purpose, and there’s a link between purpose and employee satisfaction.
What is the definition of Corporate Social Responsibility?
Corporate social responsibility is the business practice of joining environmental and social policies with a business’s economic goals and operations. It can include economic, environmental, ethical and philanthropic responsibility, and programs might include giving to nonprofit groups, job training for those in need, pledges to ensure diversity, shrinking a company’s carbon footprint through improved supply chain efficiency, community volunteering or cause-related marketing.
Committing to CSR is good for business and good for branding. But that’s not all. By adhering to the “triple bottom line” of “people, planet and profit,” a robust CSR program can lead to better PR, happier employees and more satisfied stakeholders.
Here, we’ll dive a little deeper into several business benefits of CSR.
Demonstrating brand values through CSR
CSR programs provide an opportunity for companies to demonstrate their social purpose, to raise brand awareness among stakeholders including customers, job seekers, employees and investors who want to be involved with companies whose brand values resonate with their own. It is also an opportunity to improve a company’s reputation by performing acts that demonstrate a company cares about these stakeholders as well as the environment and society as a whole. Companies with good CSR tend to get more and better media coverage – one of the best ways to advertise a company.
Think about the goodwill shown toward outdoor apparel-maker Patagonia, which has a number of programs focused on providing fair labor, supporting migrant workers and adhering to fair trade practices. Starbucks is famously committed to global human rights; from hiring practices to supply chain efforts, the company’s social mission impacts all levels of operations. Sustainability issues are core to Dassault Systèmes business practices, and its corporate statement includes three pillars of strategy: embedding sustainability in all operations, providing solutions and inspiration for customers to innovate sustainability and collaborating with stakeholders to promote sustainability.
Making a positive impact on the environment
Big problems like climate change require big, systemic solutions. The Intergovernmental Panel on Climate Change’s landmark global warming report is prompting investors to take more aggressive action toward lowering carbon emissions. The EU Taxonomy provides a framework to address greenwashing and direct investments and economic activities to sustainable projects. Companies that don’t take action on environmental sustainability in a meaningful way risk losing investment opportunities and market share.
Appealing to customers who have become conscious consumers, improving relationships with stakeholders
Businesses regard their brand to be one of their most valuable assets, and by showing a sincere social purpose among their corporate values, they can nurture public trust. Studies show consumers are much more willing to spend money on the products and services of a company that demonstrates social responsibility, even if they have to pay more. For example, a 2007 study of the stakeholder perspective of CSR demonstrates support as long as CSR programs do not hinder the organization.
Boosting employee engagement and employer brand through CSR
Employees are more likely to feel they fit in at an organization that practices corporate social and environmental responsibility. Engaged employees perform better, experience less burnout and stay longer in organizations that have robust CSR programs and defined social purpose, particularly if there is buy-in from leadership and top executives. And studies indicate people are willing to forego financial benefits to work for an organization with a broader vision to have societal impact, where they can live their values, be active volunteers and do meaningful work with good intent. A strong record of CSR can aid in attracting top talent, keeping employees engaged, decreasing turnover, and leading to lower absenteeism and an increase in productivity.
Advancing ESG goals
Environmental, social and governance, or ESG, considers how a company’s corporate policies address environmental issues such as climate change, relationships with employees, suppliers, customers and the greater community, and governance criteria focusing on leadership, executive pay, shareholder rights and other internal controls. ESG is used by investors to measure and evaluate companies. A strong CSR program is the manifestation of a company’s corporate citizenship and ESG goals.
Boosting bottom line with socially responsible behavior
By being socially responsible, companies demonstrate to a customer base that is increasingly aware of local, national and global issues that it is a company worth doing business with. Customers tend to buy more from companies that take action when it comes to issues they care about. And, potential investors use CSR to decide whether to put money into one company over another. Ultimately, CSR improves stock prices, strengthens customer base, and inspires pride and dedication among employees.
Focusing on CSR efforts is an effective way for corporations to spur innovation, create opportunities to demonstrate core values, build trust and boost their bottom line. Put it all together and it’s easy to see why businesses — and their employees — are getting serious about CSR efforts and reaping the benefits.