Posted on: Wednesday November 29, 2017
Originally published on Adiona Magazine, October 2017
Should people really care about the impact of CSR on business
In a world where public faith in free enterprise is under enormous strain, Corporate Social Responsibility (CSR) is often viewed with suspicion. Many members of the public view CSR as little more than a public relations exercise – a view shared by some business leaders. Although it can be tempting, CSR should not be thought of as a peripheral programme that does no more than make the website look good. Real Corporate Social Responsibility, when done right, is integral to business performance. There is an increasing body of evidence that demonstrates that businesses which engage in large amounts of CSR activity have more productive employees, better recruitment, lower staff turnover and higher sales than other companies. We take a deeper look at these studies to identify whether or not people really should care about the impact of CSR on business.
Most people want to work for a company that has a positive impact on society. If they end up at such a company their improved job satisfaction is likely to have an impact on the value they create. Professor Alex Edmans, of the London Business School, has demonstrated a causal relationship between job satisfaction and firm value in this 2012 study. Using data from hundreds of companies between 1984 and 2011, he found that companies with high rates of job satisfaction generated between 2.3%-3.8% higher annual stock returns over the long term. He found that “job satisfaction is a valuable characteristic [that]…is not fully valued by the market.” As a result, Professor Edmans argues that stronger CSR improves stock returns through its impact on employee productivity. A study by University of Southampton found that if businesses can use CSR as a highly effective performance incentive. The researchers found that when employees were offered a donation to a charity of their choice for reaching a target the resulting improvement in performance was almost exactly the same as if they were offered a bonus themselves. By involving employees in the CSR programme, and tying it to performance, employee productivity was increased by a staggering 13%. Companies can go even further to involve their employees in decision making. At Personal Group, we offer every employee the opportunity to donate £100 of company money to a charity of their choice, regardless of performance. We’ll also match any fundraising our team does up to the value of £250.
Recruitment and retention
Social Responsibility is a value and shared values bring teams together. If your CSR programme is at the heart of what you do then it will foster a positive work environment that will create a number of virtuous cycles. One of those is the retention of good staff. In A 2010 study by a Professor of Economics at the Rensselaer Polytechnic Institute found that public corporations rated as socially responsible had a 25-30% reduced turnover rate compared to non-CSR peers. The model used estimated that the level of increased financial remuneration needed to see the same result was equivalent to 9% of the mean wage. ProjectROI (iosustainability.com), a report released in 2014, reported that IBM’s ‘Corporate Services Corps’ programme, which enables employees to share their professional skills with a company in a developing country, produced a $600m return on a $200m investment. This was largely down to improved retention, as turnover among employees involved in the programme fell from the company average of 12% per year to just 1%. Indeed, the draw of good CSR is so strong that the 2012 Net Impact survey found that 53% of employees considered working in ‘a job where I can make an impact’ vital for their happiness. This feeling is particularly acute with young people, with 72% of students placing the desire to make an impact as either an essential or very important factor when choosing a job. With so many people on the lookout for employers who make a meaningful social contribution, many businesses cannot afford to miss out on top talent – and the savings incurred when they are retained.
A 2015 study by Harvard, Stanford and the London School of Economics found that responsible retailers, specifically those who source their products through Fair Trade principles, had revenues up to 20% higher than the competition. When they looked at the coffee industry, the saw that when two popular coffees went Fair Trade they saw sales rise 10% faster than their rivals. They also noted that demand for their products remained steady when prices were raised, while other brands saw sales fall dramatically. Every industry is different, but many businesses have the opportunities to improve their reputation and customer relationships through CSR. Customers value responsible companies – and they are willing to pay for it. The commercial benefits of CSR are clear. Although there are reputational benefits, it is far more than a publicity stunt. CEOs have the opportunity to have an enormous social impact – by freeing up the untapped potential of their employees who want to make a difference – whilst also delivering the best returns for their companies. So who cares about CSR? We all should, because socially responsible business is the future.