As consumer expectations change about the businesses they support, companies of all shapes and sizes are looking for ways they can incorporate sustainable corporate social responsibility (CSR) practices while retaining their bottom lines. The question is, where can a small business begin? Before getting started, it’s important to understand corporate social responsibility and the benefits of incorporating these practices.
What is corporate social responsibility?
Corporate social responsibility (CSR) is the effort a business makes to take responsibility for its actions and consider, as part of its business model, how its actions impact the environment and society at large. In short, CSR is about compensating for the business’s effect on the environment and community.
Corporate social responsibility can take the form of various initiatives, such as reducing the company’s carbon footprint with clean energy solutions, being proactive about labor laws and benefits, or donating to local or global charities. Generally, the initiatives fall into certain categories, including environmental responsibility, ethical responsibility, philanthropic responsibility and economic responsibility.
Bottom line: Corporate social responsibility (CSR) is the environmental, ethical, philanthropic and economic commitment businesses make to positively impact the world around them.
Why is corporate social responsibility important?
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 decisions. If you’re not doing anything to achieve responsible business practices, your customers won’t buy from you.
Research from GreenPrint found that nearly 80% of consumers are more likely to purchase a product labeled as environmentally friendly, with 77% of those surveyed saying they are concerned about the environmental impact of products they buy.
A separate study from IBM found that on average, 70% of purpose-driven shoppers pay an added premium of at least 35% more per upfront cost for sustainable purchases, such as recycled or eco-friendly goods.
FYI: Corporate social responsibility is about compensating for a company’s effect on the environment and community. CSR has become increasingly important as consumers lean toward products that positively affect the environment.
Examples of corporate social responsibility
Even within the four categories of corporate social responsibility, formulating a meaningful and impactful plan can be challenging. After all, CSR goes beyond simply making a charitable donation and calling it a day – CSR practices require daily commitment. The three companies below have made CSR a core part of their identity, to great success.
Ben & Jerry’s
Ben & Jerry’s, celebrated for its ice cream, has made corporate responsibility the center of its overall business strategy. The company uses only fair-trade, GMO-free ingredients and was among the first companies to offer employees in same-sex partnerships equal domestic benefits. Ben & Jerry’s developed a dairy farm sustainability program in its home state of Vermont and developed a hiring program specifically to employ ex-convicts in its bakery. The company is also known for speaking out on social issues, particularly how arrests for cannabis possession affect minority communities.
The soap and personal care products company might be noted for its elaborate labeling. Still, the company is just as well-known for making commitments to building a better planet. In 2015, Dr. Bronner’s obtained its B corporation certification, which audits and grades businesses for environmental performance. Since that initial certification, Dr. Bronner’s has been one of the highest-scoring B corporations in the world.
The bricks many of us played with as children come from one of the leading companies when it comes to investing in sustainability. In September 2020, the company pledged more than $400 million to make all of its packaging sustainable by 2025. Those funds will also be invested in projects that will turn Lego into a carbon-neutral company, educate children on environmental issues with “learning through play” initiatives, and other strategies to help the company reduce its footprint on the globe. As for the toys themselves, Lego has pledged to convert to fully sustainable production practices by 2030.
What CSR looks like for small businesses
For many small business owners, the thought of being socially responsible raises questions of how much impact a small company will be able to make, and how shifting to more responsible practices might affect their bottom line.
Cash-strapped businesses may fear that investing a percentage of profits into these efforts could negatively impact the rest of the company. Is it possible for a small business to be socially responsible while maintaining a healthy profit margin?
Absolutely. You can contribute without suffering economically. In fact, CSR initiatives can even save you money. For example, after General Mills installed energy monitoring systems to reduce energy usage, they saved $600,000.
Tip: For those on a smaller financial plan, replace old machinery with energy-efficient appliances, use local suppliers, plan fuel-efficient fleet routes with top GPS tracking software, and recycle waste. Reducing costs (and your carbon footprint) will boost profit margins.
Small business owners should also view innovation “through the lens of sustainability.” According to Unilever’s global vice president of HR, this means creating new products or services with sustainability as its core function. The company created a new line of hair conditioner products that use less water, allowing consumers to go green and conserve. Small to midsize businesses can satisfy the socially conscious consumer by thinking sustainably from the start.
And for small businesses that are already making CSR headway, make sure you’re communicating these efforts to customers. Like we said, consumers shop socially and earth-consciously. And they check the packaging before making a purchase.
Research from NYU’s Stern Center for Sustainable Business found that 50% of the growth of consumer packaged goods between 2013 and 2018 came from sustainability-marketed products.
Small businesses need not be overwhelmed by CSR and the deferred financial return. Begin thinking about the long term. If you demonstrate that you care, consumers will shop with you repeatedly. CSR may not boost next quarter’s financials, but it might produce a sustainable ROI.
Bottom line: Small businesses can invest in corporate social responsibility programs without risking their profits. Not all efforts require multimillion-dollar initiatives.
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 been shown to increase sales and prices as well as reduce employee turnover.
One of the reasons 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 using CSR promote positive values, which ultimately increases customer traffic and company profit.
What are the benefits of CSR for companies?
While it is a reality that businesses aim to maximize profits, it is still essential that they maintain a good relationship with the social environment they operate in. Companies that can demonstrate reliance on society and invest in their social responsibilities tend to have a greater chance of success. Some benefits of CSR for companies include the following:
- It can improve your company’s profit margins. Socially responsible companies demonstrate their ethical practices in how they conduct business. Customers are highly aware of local, national and global issues. These issues influence their buying decisions – they will buy more from companies that show concern and take positive actions over issues that resonate with customers.
- It may boost your company’s public image. Companies understand the importance of maintaining a positive reputation. Delivering high-quality products and services at a good value, as well as excellent customer service, after-sales support, and involvement in civic causes all demonstrate that the company cares about its 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 part of the criteria for deciding whether or not to invest in the company. CSR is also crucial for improving the company’s stock prices, which is essential for attracting investors.