Can You Make a Profit and Be Socially Responsible?

What is corporate social responsibility?

Corporate social responsibility is the effort a business makes to take responsibility for its actions. Companies that practice CSR incorporate sustainability into their business model and constantly consider how they impact the environment and society. ESG (environmental, social, and governance) is a similar corporate approach.

CSR can include various initiatives, including the following:

• Reducing the business’s carbon footprint with clean energy solutions
• Being proactive about labor laws and benefits
• Supporting charities locally or globally 

Generally, CSR initiatives fall into specific categories:

• Environmental responsibility
• Ethical responsibility
• Philanthropic responsibility 
• Economic responsibility

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 prioritizing responsible business practices, your customers won’t buy from you.

Research from PDI Technologies found that 74 percent of consumers care about the environmental impact of products they buy and 68 percent are willing to pay more for sustainable products. When you look at younger consumers, the trend is even more apparent: 91 percent of Gen Zers say they want to buy from sustainable companies.

Can CSR increase company profits?

Studies have shown that companies that fully integrate CSR into their operations can expect to achieve profitable growth and see sound financial returns on their investments. Companies committed to CSR can also reduce employee turnover because their practices appeal to high-level talent.

Companies can increase profits by incorporating CSR practices because customers pay attention to how organizations react to social and political issues; they’ll often boycott companies with negative values. Companies prioritizing CSR promote positive values, ultimately increasing customer traffic and company profit. 

Additionally, some socially responsible practices actually reduce costs. For example, investing in solar panels can save businesses significant electricity costs; the cost of buying and installing them is typically paid back in three to five years.

What are the benefits of CSR for companies?

Businesses want to maximize profits while maintaining a good relationship with their social environment. Companies that invest in social responsibility enjoy the following benefits:

• CSR 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. They are also willing to pay more for goods from socially responsible companies, and the price premium can add to the profit margin.
• CSR can boost your company’s public image. A positive reputation is priceless to businesses. Successful companies deliver high-quality products and services at a good value and provide excellent customer service and after-sales support. Adding involvement in civic causes can take a company’s public image to the next level. CSR shows consumers you care about your customers and the world. Companies that market green innovation initiatives enjoy positive media coverage, further strengthening their business reputation.
• CSR can attract investors. CSR can attract investors because potential stakeholders use a company’s social responsibility as part of the criteria for deciding whether or not to invest. CSR is also crucial for improving a company’s stock prices, which is essential for attracting investors.
• CSR can help your business attract and retain employees. The Benevity Impact Labs Talent Retention Study found that companies have a 52 percent lower turnover rate among employees participating in corporate purpose programs, including workplace giving and volunteering. Additionally, CSR can help with Gen Z recruitment: 37 percent of Gen Zers want to work for environmentally friendly companies. And it goes without saying that when you treat employees with respect and fairness and compensate them well, they will be more loyal to the company.
• CSR can help you streamline operations and reduce costs. Companies that focus on reducing waste save money. For example, moving from printing reports to digital reports helps companies save on paper and ink costs while reducing the trash they send to the landfill. Upgrading to energy-efficient equipment and HVAC systems can save the company on utility bill costs, and using lighter-weight packaging saves money on shipping costs.
• CSR encourages innovation. Generating consumer goodwill and reducing emissions takes creativity and innovation. Companies implementing CSR practices may invest more in R&D or solicit customer feedback for eco-friendly ideas about new products, raw materials, services and processes. Additionally, when you invest in employee training and professional development, your team is more likely to devise innovative solutions to business problems.

What are some examples of corporate social responsibility?

CSR goes beyond making a charitable donation and calling it a day; it requires a daily commitment. The following three companies have made CSR a core part of their identity.

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 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 created 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.

Dr. Bronner’s

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.

LEGO

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 packaging sustainable by 2025. Those funds will also be invested in projects that will turn LEGO into a carbon-neutral company and educate children on environmental issues with “learning through play” initiatives, as well as other strategies to help the company reduce its footprint on the planet. As for the toys themselves, LEGO has pledged to convert to fully sustainable production practices by 2030.

How can small businesses practice CSR?

Small business owners may wonder about the costs of becoming more socially responsible and how shifting toward sustainability will affect their bottom line. Is it possible for a small business to be socially responsible while maintaining a healthy profit margin?

The short answer is yes. 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, it saved $600,000.

Here are some tips for businesses adopting or strengthening their CSR practices: 

• Think sustainably when innovating. Small business owners should view innovation through the lens of sustainability. When creating new products, services or company initiatives, consider sustainability and how to appeal to socially conscious consumers.
• Share your sustainability efforts with customers. If you’re making CSR headway, communicate your efforts to customers. For example, socially conscious consumers often check a product’s packaging before purchasing. According to McKinsey and Nielsen, sales of consumer packaged goods with ESG-related claims grew 28 percent over five years compared to 20 percent for similar products without ESG-related claims. So be sure to share your eco-conscious efforts with your customers. 
• Have multiple CSR goals. While you may want to start with one CSR initiative, considering multiple socially responsible goals can be more helpful. The McKinsey/Nielsen report showed that products with multiple CSR claims have double the growth rate of those with only one claim. Customers tend to reward companies demonstrating that social responsibility is an important part of their culture by pursuing multiple areas of improvement.
• Think about the long term. Small businesses need not be overwhelmed by CSR and deferred financial returns. 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.

Stella Morrison contributed to this article.