Can you be both socially responsible and make money while doing so? The short answer is yes, and we’ll show you how to amplify both.
- Corporate social responsibility is essentially about compensating for its effect on the environment and community.
- Companies that integrate CSR into their operations can expect good financial returns on their investments.
- CSR can also improve attractiveness to investors
Can you be both socially responsible and make money while doing so? The short answer is yes, and we'll show you how to amplify both.
Corporate social responsibility
But first, let's explain why social responsibility isn't straightforward. Corporate social responsibility (CSR) is defined, according to Investopedia, as "assessing and taking responsibility for the company's effects on the environment and impact on social welfare…[and] can involve incurring short-term costs that do not provide an immediate financial benefit to the company. But instead promote positive social and environmental change."
In short, CSR is all about compensating for its effect on the environment and community. And it can exist in an array of initiatives- from reducing the company's carbon footprint with clean energy solutions to being proactive about labor laws and benefits, or donating to local or global charities.
Ben and Jerry's, celebrated for their really delicious ice cream, have made corporate responsibility the center of their overall business strategy. They serve nothing but fair trade, GMO-free ingredients and were the first to offer same-sex employees equal benefits. They also developed a dairy farm sustainability program in their home state of Vermont.
This is just one example. Businesses of all shapes, sizes, and locations are adopting socially responsible policies, and for good reason. Today's consumer is socially conscious, and this awareness directly influences their purchasing decision. And if you're not doing anything to achieve responsible business practices, your customers won't buy from you.
In a new study by Nielsen, "55% of global online consumers across 60 countries say they're willing to pay more for products or services from companies that are committed to positive and social-environmental impact."
Moreover, two-thirds of eco-friendly consumers will choose products from sustainable sources over other products and will be more likely to buy products repeatedly if they know the company is positively impacting the environment. Consumers are passionate about social purpose, and companies are altering their businesses as a result.
Small business social responsibility
But for a small business owner, the aforementioned definition can be discomforting; Mostly the part about "incurring short-term costs" that don't have "immediate financial benefit to the company." CSR seems attainable for businesses with huge budgets. But for those businesses that are cash-strapped, investing a small percentage of profits could be felt companywide. Is it possible for a small business to be socially responsible while maintaining a healthy profit margin?
Absolutely. You can contribute ecologically without suffering economically. In fact, they can even help you save money. For example, after General Mills installed energy monitoring systems to reduce energy usage, they saved $600,000.
For those of you on a smaller financial plan: Replace old machinery with energy-efficient appliances, use local suppliers, plan fuel-efficient fleet routes with GPS tracking software and recycle waste. Reducing costs (and your carbon footprint) will boost profit margins.
Secondly, view innovation "through the lens of sustainability." According to Unilever's Global VP of HR, this means creating new products or services with sustainability as its core function. The company recently created a new line of hair conditioner products that use less water, allowing consumers to go green and conserve water. Small to medium-sized businesses can aim to please the socially conscious consumer by thinking sustainably from the get-go.
And for those that are already making CSR headway, make sure you're communicating these efforts with customers. Like we said, consumers shop socially and earth consciously. And they check the packaging before purchasing.
The same Nielson study also found products with sustainability claims on the packaging showed an average 2% increase in annual sales. Companies that promoted sustainability initiatives through marketing programs saw a 5% boost.
Small businesses need not be overwhelmed by CSR and the deferred financial return. Begin thinking long-term. If consumers invest in companies that care, they'll shop with you repeatedly. CSR may not boost next quarter's financials, but it might produce a sustainable ROI.
Can CSR increase company profits?
Studies have shown that companies that fully integrate CSR into their operations can expect good financial returns on their investments. Companies integrating CSR have shown to increase sales and prices as well as reduce employee turnover.
One of the reasons why companies increase profits when incorporating CSR into their business model is because customers pay attention to the way companies react to social and political issues, and will often boycott companies with negative values. Companies utilizing CSR promote values, which ultimately increases customer traffic, thus increasing company profit.
What are the benefits of CSR for companies?
While it is a reality that businesses operate with the goal of maximizing profits, it is still essential that they maintain a good relationship with the social environment that they operate in. Businesses that can demonstrate reliance on society and invest in their social responsibilities seem to have a greater chance of success, which is where social responsibility comes into play. Some benefits of CSR for companies include:
It can improve your company's profit margins. Companies that are socially responsible are demonstrating their ethical practices in how they conduct business. Customers are highly aware of local, national and global issues, and their buying decisions are influenced by these issues, resulting in them buying more from companies that show concern and display positive actions over issues that resonate with customers.
It may boost your company's public image. Companies understand the importance of the public, especially targeted audiences, and having a positive perception of them as well as their social responsibility to the public. Delivering high-quality products and services at a good value, excellent customer service, after-sales support, and being involved in civic causes all demonstrate how the company cares about their customers and the environment as a whole. Companies with good CSR policies tend to get more as well as better media coverage, which advertises the company and improves company image.
- It can improve the attractiveness of your business to investors. Potential investors use a company's social responsibility as a part of the criteria for deciding whether to invest in the company or not. CSR is also crucial for improving the company's stock prices, which is essential for attracting investors.