If you grew up equating business people with unrestrained greed, you might wonder if making a profit and doing the right thing are mutually exclusive. After all, businesses must charge more than their costs to make a profit. Is that taking advantage of the customer? And is investing in clean energy, paying a fair wage and supporting social causes too expensive?
The good news is that you can make money and be a good corporate citizen. In fact, practicing corporate social responsibility (CSR) can positively affect the bottom line.
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.
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.
Jennifer Dublino is a prolific researcher, writer, and editor, specializing in topical, engaging, and informative content. She has written numerous e-books, slideshows, websites, landing pages, sales pages, email campaigns, blog posts, press releases and thought leadership articles. Topics include consumer financial services, home buying and finance, general business topics, health and wellness, neuroscience and neuromarketing, and B2B industrial products.