Why is social responsibility important to a business?
According to Chris Murphy at Investopedia, Corporate Social Responsibility has become increasingly important to companies over the last several years. Whether it's by empowering women, helping the environment, or trying to end poverty, more and more companies are incorporating social responsibility into their overall business strategy. The social issues may be local, national, or global, but a concern for the health and wellness of others that do not involve sales can be seen as commendable. There are many reasons why a company might engage in social responsibility...
Improving the Company's Brand
Being a socially responsible company can bolster a company's image and build its brand. The public perception of a company is critical to customer and shareholder confidence in the company. By projecting a positive image, a company can make a name for itself for not only being financially profitable but socially conscious as well. Also, by being active in the community, a company's employees are engaging with potential customers and in doing so, indirectly marketing the company in the process.
Building relationships with customers is the cornerstone of a successful company and having a social responsibility policy can impact the buying decisions of customers. Some customers are willing to pay more for a product if they know a portion of the profit is going to worthy cause. Also, if a company is active in the local community – for example, a bank that offers loans to low-income families – the company will be viewed positively by the community and perhaps boost the company's sales as a result. In short, building a positive relationship with customers and their communities can lead to increased sales and rising profits.
Retaining Top Talent
Many employees want to feel like they're part of something bigger. Social responsibility empowers employees to leverage the corporate resources at their disposal to do good. Some public corporations' employees number in the tens of thousands, and when they get behind an initiative, the results can be amazing.
Furthermore, being part of a strategy that helps the greater good can boost employee morale and lead to greater productivity in the workforce. Knowing a product and service is also helping with social causes can create a sense of pride and that pride shows in relationships with customers and fellow employees.
Helping Companies Stand out from the Competition
When companies are involved in the community, they stand out from the competition. Building relationships with customers and their neighborhoods help improve the brand's image. For example, Elon Musk, CEO of Tesla Inc. (TSLA) has bridged the gap between the corporate world and his socially responsible vision by offering electric-powered cars and environmentally friendly automotive products.
The Bottom Line
When social responsibility is recognized as part of a company's business model, it can attract positive publicity, help attract and retain top talent, and improve relationships with customers and their communities. The benefits can be far and wide, including client retention, improved sales, and financial success.
As Pamela Cone states in this segment of our "Peer Podcast"...
1. Social Responsibility Now Becoming Table Stakes -- Clients and Employees Expect More From Their Service Providers
Operational Risk - Lost business from clients requiring greater commitment, compliance, and transparency. Difficulty in recruiting and retaining employees.
CSR mitigates risk by identifying the hidden operational risk, which has become increasingly important with clients and employees. It also makes CSR integral to the company’s value proposition.
2. Stakeholders Want Greater Transparency
Operational Risk - Loss of brand trust, boycotts, divestment
CSR mitigates risk because it knows what and how to communicate to internal and external stakeholders to maintain engagement and brand trust amidst complex and evolving social issues
3. Formerly Voluntary, Social Responsibility Is Now Becoming More Regulated.
Litigation Risks - Because efforts are siloed, transactional, and not part of enterprise risk management; standards are not consistently met or measured effectively.
CSR Mitigates the risk through faster development and deployment of compliance programs and by getting ahead of the curve to ensure consistent compliance on emerging regulations.
If you'd like to contact Pam to learn about how she can help your firm develop a robust CSR program or even best practices on promoting your current CSR program, please email PamelaCone@AmityAdvisory.com. Pam is also on LinkedIn and Twitter. Connect with her!