The Key Ingredient of CSR

key ingredientEver since the term “corporate social responsibility” became popularized in the 1960s, it’s been used to cover a broad swath of ethical issues, including those that affect the environment, human rights, supply-chain sustainability, consumers and transparency with corporate governance.  All of the world’s largest companies have corporate social responsibility programs; indeed, according to a 2013 study by Boston College’s Center for Corporate Citizenship, 97% of surveyed companies reported being allocated a discreet operating budget for corporate citizenship, compared with 81% in 2010.   So it seems safe to say that CSR is a way of doing business that is here to stay.

Companies integrate CSR into their businesses in a variety of ways.  Businesses that prioritize environmental sustainability, for example, reduce their carbon footprints by reducing their pollution and developing clean energy solutions.  Ethical labor practices are also a significant focus of many CSR programs, particularly with organizations that have a global presence.  And of course corporate philanthropy is an important aspect of CSR, one that can be achieved through donations of money, goods or time, with employee volunteering and giving a particularly strong source of charitable firepower if properly harnessed.

But there is still lively debate about the merits of CSR.  Supporters insist that CSR is intricately tied to a company’s profitability and long-term viability, while detractors argue that it distracts from a company’s bottom line and serves as mere window dressing for a company’s PR efforts.  The issue between profitability and social responsibility is one that continues to be much studied, but until there’s more conclusive data the debate will persist.

In a recent article for Devex Impact, Floyd Whaley writes about the investor perspective on CSR.  According to Bharat Joshi, an investment manager at Aberdeen Asset Management in Malaysia who works with a team to oversee $1.7 billion in assets, “Companies should do CSR in a measured way, not funnel cash to a founder’s social business or charity. It is okay to take from the bottom line if it is being done in a sustainable way. It’s healthy and investors look at it quite highly.”

Whaley also notes the views of Peter Gampel, the director of business valuation at the accounting firm Fiske & Company in Florida.   “If there is a merger, we are brought into put a value on intangibles.  There are dollar amounts for patents, licenses, customer relationships, trademarks, but we don’t usually try to assess the value of a company’s social responsibility. This is not quantifiable from a numbers point of view.”  However, Gampel goes on to state that CSR does clearly have an impact on a company’s value and profitability because a socially responsible business is more appealing to consumers and top employee talent.

Indeed, numerous studies indicate that consumers gravitate towards brands that demonstrate CSR and away from businesses that don’t practice good corporate citizenship.  And employees  – particularly Millennials – are equally concerned about the corporate company they keep; one study from job search site TheLadders, for example, reported that 72 percent of workers said they would choose a job at an eco-friendly company over another company if given the choice.

While the argument over the profitability of CSR wages on, few can disagree about the increasing importance of CSR to an engaged workforce.  Companies that create employee-driven CSR programs help workers feel a sense of greater purpose around their jobs; help attract top talent and then keep them; and provide strong platforms for employee leadership and development.  In today’s world, employee volunteer programs are an essential component of a company’s CSR approach, one which benefits employee, the community and the company.

Related articles:

How Corporate Social Responsibility Alleviates Public Distrust

When is Corporate Philanthropy Like a Great Game?

Leveraging Corporate Social Responsibility to Save the World, That’s All

 

 



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