Effective CSR increases the bottom line. Follow these five pieces of advice from industry experts and turn your CSR into ROI.
Are Corporate Social Responsibility Programmes beneficial for the bottom line?
It’s time to answer the question once and for all!
whatimpact’s experts reviewed recent research literature and found that when run right, CSR programmes have a positive effect on the financial results, reputation and legitimacy of a company.
They also found five factors that separate effective CSR programmes from those that swallow time and money.
Follow their advice to turn CSR into ROI.
1. Tie CSR programmes to strategic goals
Many companies consider CSR programmes as an unnecessary expenditure or an optional charitable activity but numbers tell another story:
A meta analysis compiling the results of over 200 studies concluded that effective CSR strategies can increase market value by 4-6% over a 15 year period.
CSR can even add a 20 percent price premium, increasing sales revenue.
However, the programmes improve the bottom line only when they are tightly linked to companies’ strategic goals.
“A firm’s CSR should address not just social responsibility issues but actual strategic issues,” state the Seoul University researchers Seungwoo Oh, Ahreum Hong and Junseok Hwang.
2. Focus on shared value
While serving a company’s own needs and strategic goals, an impactful CSR programme should also benefit society.
Michael E. Porter and Mark R. Kramer state in Harvard Business Review that many firms’ corporate responsibility efforts are counterproductive because “they pit business against society, when the two are actually interdependent”.
In the intersection of shared value both companies and society benefit.
3. Select CSR initiatives carefully
Once the intersection of corporate and societal benefits is identified, it’s time to get into action. Here a careful selection of social initiatives plays a key role.
Be specific about your CSR activities as they don’t all t improve the bottom line, as many researchers remind.
Porter and Kramer advise companies to mount a limited number of initiatives that make a true difference instead of setting up a wide range of projects which don’t make a proven impact.
4. Authenticity over reputation
CSR projects are often considered important for the reputational advantages that they bring to companies. Developing a positive image among stakeholders can indeed improve the financial performance as well, and consumers do expect firms to take action.
63 percent of American consumers are looking to businesses to take the lead on social and environmental change.
In the future, the trend will probably only grow. Generation Z is coming of age now, and 94 percent of them think companies should address critical issues.
However, the initiatives need to be genuine and not merely symbolic.
Superficial CSR implementation can create a “legitimacy gap” which leads to losing the trust of investors and consumers. Commitment and measuring impact are far more important than optics.
5. Commitment matters
In line with authenticity, also commitment to selected initiatives matters. This requires clear and long-term commitment, as well as time and money investment over the run long.
Practically speaking this might mean for example backing volunteering programmes up with product, service and money donations. While employee volunteering programmes are highly popular and can improve employee retention and satisfaction, measurable long-term results require commitment and effort.
Start with finding your shared value partners
Where to set up CSR programmes that turn into increased sales, improved profits, strengthened customer relations and don’t deplete your resources without results to show?
A natural first step is to look for partners who share your values and help you make a strategic impact. Trial the whatimpact platform for free and start matching with the partners who help your business grow, too.
Hafiz Yasir Ali, Rizwan Qaiser Danish & Muhammad Asrar-ul-Haq: How corporate social responsibility boosts firm financial performance: The mediating role of corporate image and customer satisfaction
Michael E. Porter & Mark R. Kramer: Strategy and society: the link between competitive advantage and corporate social responsibility
Zhihong Wang & Joseph Sarkis: Corporate social responsibility governance, outcomes, and financial performance
Seungwoo Oh, Ahreum Hong & Junseok Hwang: An Analysis of CSR on Firm Financial Performance in Stakeholder Perspectives
Sang Jun Cho, Chune Young Chung and Jason Young: Study on the Relationship between CSR and Financial Performance