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Corporate Social Responsibility can help create value

Corporate social responsibility is often thought of as altruism or public relations, and many companies pay lip service to the notion by funding development projects in the areas in which they operate. These companies actually see corporate social responsibility as a legal requirement they have to adhere to, minimizing costs, rather than a voluntary option they can choose and take advantage from.

We need move beyond this approach, viewing corporate social responsibility as a larger picture where companies consider the social and environmental impact of their policies alongside profit when determining investment strategy and management practices.

Although companies are primarily business organizations run for the purpose of making money off of their product or service, they have a wide-ranging set of responsibilities to their own suppliers, customers and employees, to the communities in which they are located and to society at large. Recent McKinsey Quarterly surveys reveal that today’s business leaders are called upon to play an increasingly significant role in helping to resolve some of our most pressing social issues, from health care to the environment.

Plenty of valid arguments against corporate social responsibility have been presented over time: perhaps the biggest of them is the lack of tangible economical benefits.

“The belief that corporate responsibility ‘pays’ is a seductive one: Who would not want to live in a world in which corporate virtue is rewarded and corporate irresponsibility punished? Unfortunately, the evidence for these rewards and punishment is rather weak,” David Vogel, author of The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, wrote in a Forbes special report last October.

Yet businesses are demonstrating that well-managed, strategic corporate responsibility actually supports business objectives and does have benefits, intangible though they may be: attracting and retaining valuable talent, increasing brand awareness and improving relations with compliance regulators are a few.

A Hill & Knowlton report released last year indicated that almost three-quarters of 530 MBA candidates surveyed worldwide said reputation plays an extremely important or a very important role when considering where to work after graduating. Factors that drive reputation included social responsibility in addition to management quality, product quality and use of corporate assets.

Moreover, Edelman’s 10th Trust Barometer concludes that 77 percent of respondents refuse to buy from companies they distrust.

McKinsey and others have found that, due to increasing pressure from consumers and employees, companies are responding to the demand for more ethical business processes and actions.

“Whether changes are made to be more attractive employers, a more appealing supplier to a large multinational or simply because of the ethical desire of the owner,” all the evidence in Grant Thornton’s survey findings points to businesses becoming more socially responsible.

“Today, more than ever, organizations are focused on environmental and social responsibility as a strategic objective,” the 2009 IBM Institute for Business Value study finds. The recent survey of 224 business leaders worldwide shows that “60 percent believe corporate social responsibility has increased in importance over the past year.” Only 6 percent consider it a lower priority.

Nearly all said they remain committed to incorporating principles of corporate social responsibility into their business strategies — despite the global recession — to improve business performance, societal contribution and reputation.

Increasingly more organizations are holding themselves to a higher ethical standard considering the overall interests of society in the operations of their day-to-day business, but many of them don’t know how to actually make changes that would improve both business performance and societal impact.

“Corporate social responsibility (policy, program or process) is strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm’s effectiveness in accomplishing its mission,” according to Lee Burke and Jeanne Logsdon in How Corporate Social Responsibility Pays Off.

It does so by emphasizing the new idea that the purpose of corporate social responsibility within firms is for value creation.

5 comments on “Corporate Social Responsibility can help create value

  1. Pingback: Corporate Social Responsibility can help create value « Reporting … | Money Blog : 10 Dollars : Money Articles.

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  4. Homa Pourasgari
    August 21, 2009

    Let’s be clear about one thing – The majority of corporation always look at their pockets and profit. One of the main reasons that suddenly they are ethical is people are speaking up through social networking sites. Take Nokia for example. When Iranians found out that they were a contributing force in the crackdown of protesters, Iranians and their friends all over the world boycott their products. Nokia’s stock took a dive in the large pool of financial markets.

    Now, companies are waking up to that fact that what may have worked before the age of the internet, no longer works today. Information gets passed around quickly through sites such as facebook and twitter. Corporations are realizing that consumers are talking and so they better be listening in order to guard their profits.

  5. euandus
    October 17, 2009

    Thanks for the good post! I wonder if JPMorgan and Goldman Sachs “relativize” the CSR field (by their continued bonuses and risk-taking after the bailout).

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This entry was posted on August 21, 2009 by in News and tagged .
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