The business benefits of corporate social responsibility

We don’t always need to be looking for a new angle when it comes to driving growth in our business.  Often slight changes to what we are already doing will lead to improvements and greater efficiencies, thereby driving business growth.

Many organisations contribute to society by supporting charities and not for profit groups that work to fill the gaps in society left by business and government. With the exception of the mature and large corporate entities, many businesses choose to make their contribution in the form of monetary donations and/or skilled and unskilled volunteering.

The level of giving to the charity and not for profit sector, also known as the ‘for purpose’ sector by business and government sits around 15%. The other 85% is made up by individuals. There is a strong argument that can be made that business is doing its bit by employing those who make the donations.

However, the question must be asked, if the contribution to the for purpose sector was more attractive and provided better returns to business, would we see a change in the level of giving by businesses? The challenge to those in the for purpose sector is not soliciting more donations for the same return, it is engineering greater returns to those who are engaging in the for purpose sector.  The ‘for purpose’ sector can do its part by making it more attractive and easier for business to derive a meaningful return.

Michael Porter, a professor at Harvard Business School and co-author of Creating Shared Value says, "Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face."

The proposition of shared value is that businesses can benefit commercially from tackling society’s problems. Companies can engage in shared value in three ways:

1. By reconceiving products and markets;
2. Redefining productivity in the value chain; and
3. Building supportive industry clusters at the company’s locations.

The benefits back to business from a strategic approach to their engagement strategy with the for purpose sector sees measurable returns in many areas, including:

Employee Attraction

The 2020 Workplace Report found that 80% of a sample of 1,800 13-25 year olds wanted to work for a company that cares about how it impacts and contributes to society. More than half said they would refuse to work for an irresponsible corporation.

Staff Retention

Analysis by the HayGroup suggests that Australia can expect a turnover rate of around 22% over the coming years. An effective corporate social responsibility (CSR) program based upon shared experiences will positively impact your staff retention rates.

Increased levels of Employee Engagement

Hewitt Associates conducted a study into CSR which found, "That it is important to be consistent and sustain a CSR strategy over the long term, in combination with other employee engagement boosters such as competitive compensation, and good management and health and safety practices." The perception of a decline in CSR performance was said to be a significant threat to engagement for a third of the employees surveyed. Combined initiatives to sustain both employee engagement and support CSR transformation will most likely yield a better return on investment than individual non-coordinated efforts.

Customer Loyalty

Researchers Kusum L. Ailawadi and Jackie Luan from the Tuck School of Business at Dartmouth set out to quantify how much CSR benefits a company using the consumer goods retail sector as a testing ground, and 3,000 grocery shoppers as subjects. The study found that:

• Improving consumer perception on a CSR dimension just a little bit (1 point on a 5 point scale) can result in sales lift of 10-15% on average;
• There are opportunities to add a price premium for brands/products with CSR benefits–as much as 12-16%;
• Consumers prefer CSR-oriented retailers because they see personal benefit from the CSR initiatives which resonate with their values.

Brand Enhancement/Differentiation

In her research paper, Strategic CSR acts as insurance for reputation, which improves financial performance, Lauren Rakowski from the Network for Business Sustainability found that "Consumers’ purchase intentions were twice as high for products of companies described as having a strong CSR reputation compared with those with a weak CSR reputation following a product recall." The benefit of CSR even without a product recall is the investment in the insurance of the goodwill that is afforded the company by their commitment to CSR.