The Value of CSR

My company doesn't have a visible CSR policy. Is this hurting our bottom line?


What is CSR?

Companies command significant resources, and their operations can have a significant impact on their surroundings for both the better and worse. A company chosing to set up its manufacturing in a small town, for example, can improve the residents' lives by stimulating the local economy. However, if that same company is negligent with its waste disposal, it can also worsen those same people's lives by ruining their environment.

In recognition of this fact, some companies have chosen to balance their pursuit of profit with a commitment to ethical conduct in the course of their operations, thus creating the concept called corporate social responsibility (CSR). Sometimes, this can be as simple as the companies choosing to support charitable organizations, but other times, this can even see them overhauling their operations in order to mitigate the consequences for their stakeholders as a result of their actions. Google summed up CSR best with their simple but nonetheless powerful statement, "Don't be evil."

Google summed up CSR best with their simple but nonetheless powerful statement, "Don't be evil."

However, it is important to note that most companies have more than corporate ethics in mind when coming up with their CSR initiatives. After all, such efforts can accumulate much goodwill for the companies that support them, which makes it that much easier for said companies to sell their products and services to both existing and potential customers. As a result, it is not unreasonable for them to expect CSR initiatives to boost their sales lead generation as well as their sales conversion rate, either one of which can have significant benefits for their profits.

Furthermore, CSR initiatives are useful for building positive relationships between companies and their stakeholders, which can bear fruit in some surprising and some not so surprising ways. For example, if a company manages to please the community in which its operations are based, it might be able to expect better treatment from the municipal government, which is answerable to those same people.

Given these two factors, it is no wonder that a fair number of companies expect their CSR initiatives can raise their revenues by more than what they will spend on them, making them not just the ethical option but also the profitable option. Something that should come as particularly welcome news to corporate executives, who are answerable to their shareholders as well as their conscience.

Why Is It Important That a CSR Policy Be Visible?

However, even the best CSR policies will have no effect unless you take care that they are published in a public and prominent place for all to see. This way, you can make sure that awareness of the fact spreads to your employees as well as your stakeholders, which is important in both cases but for separate reasons.

Firstly, and most importantly, you need the cooperation of your employees if your CSR initiatives are to succeed. For example, if you are planning to reduce its generation of waste by increasing your recycling, you're going to need your employees to start disposing of more of their rubbish into the right recycling bins. By making your CSR policies visible, you make sure that their employees will know what they should be doing while also providing them with the push needed to break through the apathy that can be a serious hindrance to such efforts.

You need the cooperation of your employees if your CSR initiatives are to succeed

Secondly, you are not going to be able to reap the benefits of your CSR initiatives unless you make your efforts known to your stakeholders. While some awareness will spread as a result of simple interaction with these people, it will spread faster if you actively take steps to encourage it, ensuring that your CSR initiatives will have the maximum impact on your reputation.

CSR initiatives can certainly bring benefits if you choose to implement them, but they will not be able to produce those benefits unless they are made known. Without this commitment, you cannot expect results.

Does the lack of a visible CSR policy hurt profits?

With that said, most companies know that they should not implement drastic changes without compelling evidence proving that it is the right course of action. Fortunately, there have been a number of studies on the impact of CSR initiatives, meaning that there is evidence to support the claims that CSR is as financially-sensible as it is ethical.

For starters, The Economist's Intelligence Unit surveyed more than 500 companies based in the United States about their opinions of CSR before interviewing a number of experts and executives for more in-depth information. Their results were telling. 74% of the respondents stated that CSR had the potential to increase profits for them. Increasing revenue, increasing profit, and cost savings were revealed as the three most popular reasons that they implemented CSR initiatives. Furthermore, it is interesting to note that almost half of the respondents stated that they were planning to increase the amount of resources being poured into their CSR initiatives, even more persuasive evidence that they genuinely believed what they were saying to the surveyors.

Companies' Primary Purpose for CSR.
Source: 566 US-based executives—39% at vice-presidential level or above—conducted by the Economist Intelligence Unit in September 2008

Of course, the proof of CSR's profitability is not limited to The Economist's single study, though it is one of the better examples of its kind. More inferential evidence can be found in the form of a 2014 Harvard Business School paper,

Combined, these studies show that a visible CSR policy can be profitable for the company, though it is important to note that they also show that it is by no means a universal phenomenon.

Is it affecting me?

The problem with increasing profits by implementing CSR initiatives is that there is such a huge number of them out there. As a result, some CSR initiatives can produce the promised results, while others cannot. Even worse, not all CSR initiatives can be expected to produce the same results for businesses of all sizes and all industries, not least because different businesses have different stakeholders with different degrees of influence. To navigate this morass, you must be both able and willing to test specific CSR initiatives for their effectiveness if you want to improve your profitability.

The simplest and most straightforward method to determine the effectiveness of a specific CSR initiative, or the lack thereof is to just ask your customer base if it will make them more willing to buy your products and services. For this to be success, you have to know what kind of people make up your customer base, which you can do by checking your past customers as well as your email subscribers. Consider that you need a high response rate to combat response bias, which might mean using an incentive of interest to the people that make up your customer base in order to convince as many of them to respond as possible. Fortunately, if you feel that you are not capable of such efforts, you can find assistance in the form of market research companies, which will do the havey lifting for you.

You can check to see if your customer base was telling the truth by comparing your sales statistics before and after launching your CSR initiative. If you see increases to its sales figures, sales leads, and sales conversation rates that cannot be connected to other causes such as prevailing economic trends and new marketing campaigns, then that can be considered proof that your CSR initiative is producing the desired results.

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James Bradley

Founder & CEO of Repixl. I love finding answers to your hardest questions!

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