What is corporate social responsibility?

Simply put, corporate social responsibility (CSR) is the focused actions of a company that desires to do well while simultaneously doing good.

CSR can be seen as a dynamic process by which a business manages its relationships with a variety of influential stakeholders – including employees, customers, business partners, shareholders, local communities, policy makers and the environment. CSR is about building strong connections with customers, attracting and retaining talented staff, managing risk and ensuring reputation.

Other terms for social responsibility include sustainability, corporate citizenship, community relations, business ethics, and cause marketing – though each focuses on a slightly different part of the business-stakeholder relationship model.

Industry leaders, pundits, policy makers and consumers each may have their own definition - and opinion - but one thing is for certain; CSR is here to stay.

Why should businesses care?

Quite simply… they can’t afford not to.

There are many positive drivers as well as “carrot and stick” incentives for businesses to adopt socially responsible business practices and programs. A few things to consider…

Benefits of CSR:

1). Enhanced corporate brand image, trust and reputation.
• 86% of consumers have a more positive image of a company they believe is doing something to make the world a better place
• 80% of Americans say that corporate support of a cause(s) wins their trust in that company
• 69% of business leaders believe that the public has a right to expect good corporate citizenship
• 92% of Americans think that it is important for companies to make charitable contributions or donate products and/or services to nonprofit organizations in the community
• Businesses are amongst the least trusted institutions in America today

2). New customer acquisition and development of strong and enduring relationships with consumers
• 40% of respondents in a survey of 3,500 Americans say that good corporate citizenship makes them more willing to do business with a company
• 86% of consumers state they are likely to switch from one brand to another that is the same price and quality if that brand is associated with a cause
• 42% of all Americans are willing to spend more for products branded as organic, environmentally friendly, or fair trade.
• 53% of people surveyed felt that a company’s social record influences whether they will purchase a product from that company, work at the company or recommend it to others, invest in that company, or welcome it to their community

3). Increased ability to attract, motivate and retain the most talented workforce (plus benefit from lower turnover rates and associated costs)
• 81% of Americans feel that a company’s commitment to social issues is important when they decide where they want to work
• 72 percent of employed Americans would choose to work for a company that supports charitable causes when deciding between two jobs with the same location, responsibilities, pay and benefits.
• 9 of 10 employees of companies involved in cause marketing programs reported they feel proud of their companies

4). Improved financial performance and the ability to attract new resources and/or influence key stakeholders – such as investors, business partners and policy makers
• 70% of Americans feel that a company’s commitment to social issues is important in deciding which stocks or mutual funds to invest in
• 64% of business leaders say that corporate citizenship makes a tangible contribution to the company bottom line.
• A DePaul University study concluded that companies with defined corporate commitment to ethical principles do better financially than companies without such commitment
• A Harvard study found that “stakeholder-balanced” companies experienced four times the growth rate and eight times the employment growth when compared with companies that focused only on meeting the interest of shareholders

Risks

And now the other side of the coin. Here is a look at the risks of not having a comprehensive CSR strategy and ethical business practices in place. Your company may be at risk for:

1). Exposure to [often widespread] unfavorable public opinion and increased reputational risk
• A University of Southwestern Louisiana study determined that publicity about unethical corporate behavior lowers the stock prices of such publicized companies for a minimum of 6 months
• Unpopular public opinion (less than 25% of Americans feel that companies and their commitment to community are headed in the right direction)

2). Increased litigation and related legal costs
• Costs of litigation and/or regulation can be massive (in terms of actual dollars, and lost consumer, employee and stakeholder trust) for those companies just “eking by” or avoiding doing good.

3). Decreased shareholder value and diminished stock price
• Consumers and stakeholders will often punish companies for “bad behavior”
• Lawsuits and increased negative publicity can have a very direct impact on share price in the short- and long-term.

4). Decreased customer loyalty, loss of customers and/or stakeholder support
• More than a third of consumers worldwide boycott at least one brand
• Consumers will react to bad behavior by considering switching to another company’s products or services (90%), speak out against that company among family and friends (81%), consider selling their investment in that company’s stock (80%), refuse to invest in that company’s stock (80%), refuse to work at that company (75%), boycott that company’s products or services (73%), be less loyal to their job at that company (67%)

The Bottom Line

Developing (and communicating) a comprehensive CSR strategy takes time, commitment, focus, and designated people and financial resources. And, it requires commitment from the executive offices on down to every individual department and staff position. To be truly effective, your CSR strategy must permeate all you do – from hiring to branding to manufacturing to sales – and it must become part of your “corporate DNA”. Getting there is not an easy process, doing it well can be resource-intensive, and it doesn’t happen overnight. But can you afford not to get started?