The Benefits of CSR
When companies implement corporate social responsibility programmes into their business they increase the potential for a lot of different benefits. Depending on the level of efforts that companies make with their corporate social responsibility activities, the benefits can be quite considerable. Indeed, as Paul Klein (2014) writing for The Guardian argues:
“Corporations recognised that there was a business case to support environmental sustainability about 10 years ago: reducing environmental impact saved money and could deliver value through increased competitive differentiation, customer loyalty, and positive impressions among politicians and regulators”.
In 2006, highly respected management guru Michael Porter and his colleague Mark Kramer reviewed the benefits of corporate social responsibility and found what they argue to be the four prevailing justifications for introducing CSR. The four justifications are considered by them to be moral obligation, sustainability, license to operate and reputation. However, it might be argued that the one that has the most weight is that of reputation. After all, many companies do implement CSR initiatives because they want to be seen by their customers to be doing good and treating people fairly and having a minimal environmental impact so that customers will be more likely to purchase their products.
The issue of reputation leads savvy organisations to be able to increase their competitive advantage by getting involved in corporate social responsibility. These days many customers are more inclined to buy from a company that is responsible towards its workers and the environment than one that is not. Companies that report high profits and large bonuses that do not give anything back to the local communities in which they operate can sometimes have the effect of sickening potential customers.CSR Value Curve. image Source: IBM
Many customers are more aware of the way in which companies operate and this has the strong potential to influence their buying patterns. This means that organisations that do corporate social responsibility well do have an opportunity to increase their competitive advantage over other firms in their sector. As time marches on it is perhaps questionable if companies that do not engage in corporate social responsibility will be able to survive at all, as customers increasingly develop a social conscience regarding their buying patterns. This is not the situation right now, as customers are currently not necessarily aware enough of these types of issues, but when disasters such as the Rama Plaza factory collapse in Bangladesh occur, awareness does increase, and over time this is only likely to grow.
One example of an important benefit that can be achieved is improved performance and profitability. Looking at an example of this helps to illustrate how it is possible. In environmental CSR companies can save money in a myriad of different ways which can lead to improved financial performance. One such way that money can be saved is when organisations decide to allow virtual working with a view to cutting back on office space required and reducing the energy that they need to be able to function as an organisation – with a goal to cutting back on carbon emissions. When employees work from home they do not need space in the office environment and so the size of the premises needed to accommodate employees reduces. This has an impact on the cost of rent (where organisations pay rent) but also on areas such as utility bills which will be smaller when the organisation’s buildings take up less space and require less energy to heat or cool, and so on.Consumer Attitudes to CSR. Image Source: Marketingcharts.com
Another important business benefit of CSR is the improved relationships that are built with communities. There is a line of argument that says that organisations that work within communities to build CSR programmes will function better with their day to day workings with those communities because those communities will be more likely to support them. This is because those communities are being engaged as important stakeholders through CSR activities. It may be argued that the relationship between the community and the company in these cases, provided that the CSR programmes are genuine, will be based on trust and credibility rather than mistrust and a sense that the community is being plundered for cheap products and services. It may be argued that when local stakeholders are engaged in this way and especially when they are involved in decision making they will be more likely to support the organisation with its key initiatives and consequently the organisation’s operations will generally be easier to run.
Guide To Corporate Social Responsibility Part 1
Guide to Corporate Social Responsibility Part 2
Guide to Corporate Social Responsibility Part 3
Guide to Corporate Social Responsibility Part 4
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.