UK businesses have long recognised the benefits of corporate social responsibility (CSR). The concept originated in the efforts of 19th-century British industrialists, who began building houses, schools and medical facilities for employees in recognition that a healthy, educated workforce had a positive impact on both people, society and profit.
Since those early philanthropists first identified the benefits of CSR, its scale and scope have grown. Rising environmental awareness has added new areas of focus, while changing social pressures have increased the diversity of challenges businesses can choose to address with their CSR programmes. When it is successfully implemented with support from the board, CSR is a force for good for businesses, stakeholders and society.
What Are the Benefits of CSR to Businesses?
1) CSR Creates a Positive Public Image
A strong and well-communicated CSR programme that aims to solve real-world problems and reports genuine result — and does not participate in for-show-only activities such as greenwashing — is a powerful influencer of public perception.
This is of real value in an environment where public trust in corporations has been undermined by corporate scandals and the lingering effects of the 2008 financial crisis. Businesses that act with integrity to improve the world around them establish a reputation for doing the right thing that will stand them in good stead with customers, employees and investors alike.
2) CSR Helps to Build Customer Loyalty
Strong CSR can also strengthen customer relationships, as a new generation of consumers increasingly seek to buy from businesses that share their ethics and values.
As awareness of climate and social issues rises, companies are judged on far more than just the price and performance of their products and services. In fact, research suggests that 59% of consumers are willing to pay more for environmentally responsible products, with a separate study finding that 71% prefer to buy from companies that align with their personal values.
This effect is more marked among millennial and Gen Z consumers, whose buying power is now beginning to dominate global markets – businesses and boards ignore this demographic at their peril.
3) CSR Promotes Creativity and Business Agility
There is no one-size-fits-all CSR approach, which means businesses can be creative about the initiatives they choose to undertake. At its most effective, CSR should align with the business’s core values, but these can be interpreted broadly to show innovation and encourage employees to think outside the box.
Many organisations have demonstrated this powerfully during COVID-19. Reprographics giant Ricoh repurposed its UK 3D printing facilities to produce 40,000 face shields per week for local NHS workers. Simultaneously, HP launched its “Turn to Learn” initiative, an educational programme designed to bridge the digital access gap by delivering free printed educational content from leading scientific, publishing and media companies to support teachers and students where learning was disrupted.
The Benefits of CSR to Stakeholders
4) CSR Promotes Employee Engagement and Satisfaction
Doing good feels good, and a key benefit of CSR for employees is an increase in their engagement and job satisfaction. Strong principles and business ethics are increasingly crucial to employment candidates, and increasingly individuals won’t take a job if the company doesn’t have a strong CSR programme.
More engaged employees are happier and more productive, which benefits the business and leads to lower churn rates, creating a win-win situation.
5) CSR Improves the Bottom Line and Attracts Investors
Customer loyalty, values-driven purchasing, innovation, and engaged employees all contribute to a more efficient, stable business with a more devoted customer base. This translates to more sales revenue and more sustainable value creation for investors, many of whom are now prioritising non-financial performance measures as part of their portfolio management decisions.
As a result, a major benefit of CSR for stakeholders is stronger business performance and broader opportunities to invest.
The Benefits of CSR to Society
6) CSR Contributes to Solving Global Problems and Local Challenges
It is essential to remember that – commercial benefits notwithstanding – acting responsibly is simply the right thing for businesses to do. CSR programmes that align with initiatives such as the UN’s sustainable development goals can work to solve problems on a global scale.
Additionally, corporate commitment to CSR builds expectations among consumers and leads to a “rising tide” effect, where the success of businesses with strong CSR prompts competitors to adopt similar tactics. We are now seeing this evolve into more formal undertakings in the form of broader environmental, social and governance (ESG) commitments.
7) CSR Connects Corporations With Communities
Besides contributing to solving global issues, CSR benefits society by offering businesses a route to connect more closely with local communities. Direct benefits accrue in the form of initiatives such as charity fundraising and corporate volunteering.
Businesses typically draw their employees from the communities immediately around them, meaning local activities can create employee satisfaction while building trust between the business and the local community.
Beyond CSR – Building on Best Intentions
The drawbacks of CSR are far fewer than the many benefits it delivers. However, if any criticism can be levelled, it is this: CSR programmes vary so widely that it can be hard to compare performance between organisations and industries. Is one company’s carbon footprint reduction as effective as another’s success in designing out waste material, for example?
It isn’t easy to measure progress when organisations choose different metrics to report their achievements. And, given the reputational benefits that CSR programmes deliver, it may be tempting for organisations to emphasise strong performance areas over those where their record is weaker.
As we saw from the impact of CSR on purchasing, employment and investment decisions, it is becoming more important for stakeholders to evaluate businesses objectively. This means that meaningful measurement of performance across universal metrics – across environmental, social and governance spheres – is needed. Some of these metrics may be covered by existing CSR activities, but many may not be within their scope.
Now is a good time for businesses to start evaluating the benefits of CSR activities and mapping these to frameworks: for instance, mapping activities to the World Economic Forum’s ESG metrics to build a more comprehensive approach that incorporates environmental, social and governance elements while aligning with UN sustainable development goals. Tools such as Diligent’s ESG Solutions help businesses and boards take the next step beyond CSR to clearly understand their performance in the context of industry peers and operationalise their commitments to turn ESG directives into action.
There is no doubt that many stakeholders have felt the benefits of CSR since the concept first gained support in Victorian times. Now, as stakeholder expectations become increasingly rigorous, forward-looking organisations need to prepare for an era where commercial success is closely entwined with ESG programmes as the natural successor to CSR.
November 25, 2020
Measuring What Matters: Why and How UK Boards Must Continue Driving the ESG Agenda
Increasingly, consumers, investors and the public are scrutinising the actions (and inactions) of corporate entities and demanding that they go beyond simply a tick-box approach to meeting regulations. Boards are being challenged to adopt an environmental, social and governance (ESG)-focused mindset and apply it to every aspect of business strategy