The Key Ingredient of CSR
Ever 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 business approach that is here to stay.
Companies integrate CSR into their businesses in a variety of ways. Organizations that prioritize environmental sustainability, for example, minimize 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 financial merits of CSR. Supporters insist that CSR is intricately tied to a company’s profitability and long-term viability, specifically helping to supercharge a company's public image, media visibility and positive workplace environment, for starters. Detractors argue that CSR distracts from a company’s bottom line and serves as nothing more than expensive window dressing for a company’s PR efforts. The issue between profitability and social responsibility is one that continues to be much studied, but the debate is bound to persist until more conclusive data is gathered.
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.," Gampel asserts. "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. For example, one study found that that 80% of the 250 most profitable companies globally filed CSR reports in 2008, while another report concluded that CSR was associated with an increase in return on assets of between 1.8 and 2.5%.
And it's clear that 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 unquestionably benefits employees, the community and the company.
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