Being socially responsible is increasingly important for modern organizations. As consumers become more demanding and investors become more sophisticated, corporate social responsibility (CSR) becomes increasingly significant for businesses that need to demonstrate responsiveness to social problems.
The extent to which an organization can benefit from corporate social responsibility varies depending primarily on the nature of the business. However, business literature has identified a strong correlation between social performance and financial performance. Research from the Institute for Business Ethics suggests that organizations that demonstrate corporate social responsibility are more likely to be commercially successful in the future. Besides, over 90 percent of the FTSE 100 companies have an explicit policy on ethics, while over 50 percent of the organizations surveyed in a 2007 study by ‘Personnel Today’ had an explicit policy on corporate social responsibility. Although organizations should not focus on profit when implementing socially responsible policies, the long-term business benefits associated to such practices are numerous.
Explicit policies on corporate social responsibility can be addressed to several departments within the organization. Usually, such practices encompass the activities of human resources, marketing, business development, or finance departments and the benefits derived are based on the strategies implemented.
In particular, the potential business benefits derived from the implementation of corporate social responsibility are the following:
> Risk Management
Modern organizations implement risk management strategies to decrease or even eliminate the risk posed on the organization by a variety of practices associated to several potential threats. Risk management is of vital importance to many corporate strategies. Organizations that have made strong efforts over the years to build a good reputation and have spent a lot of money to maintain it through product development and customer loyalty strategies, may be ruined is seconds due to a corruption scandal (Enron scandal) or an environmental accident (Chernobyl disaster). Such incidents draw the attention of the media and may cause irrevocable damage to the reputation of a firm. The only way to anticipate such events is to embed social responsibility into organizational culture in order to offset such risks.
> Product differentiation
Organizations that want to remain competitive and viable in today’s marketplace need to offer differentiated products. Through product differentiation, organizations aim at achieving a competitive advantage by increasing the perceived value of their products relative to the perceived value of the products of their competitors. Particularly, for organizations that implement socially responsible policies, product differentiation can satisfy the unmet needs of consumers offering both financial and business benefits to the firm. Firms that offer environmentally friendly products experience higher sales growth than firms that sell conventional products, and usually such products sell at a higher price. Besides, firms that offer unique value propositions to consumers differentiate their products in consumers’ minds and contribute to building customer loyalty based solely on ethical values. Therefore, in the context of corporate social responsibility, organizations develop new products aiming, not only to become more competitive, but also to make a greater impact on society through their ethical practices.
> Employee motivation
Organizations that are socially responsible are more likely to recruit and retain their human capital easier. A 2007 research by Kenexa Research Institute (KRI) that surveyed employees from six countries (USA, Brazil, China, India, UK, Germany), suggests that when employees have a positive view for the organization’s CSR strategies, they are more willing to work for it, participate to its efforts, align with its culture and recommend it as the best place to work. Employee satisfaction deriving from corporate social responsibility leads to higher productivity, higher employee retention rate, better organizational performance, and ultimately, higher profitability.
Conclusively, although the benefits of corporate social responsibility cannot be explicitly measured as they are primarily based on the nature of the business, they are numerous and they cannot be neglected. Particularly, in an era that the protection of the environment is imperative and global warming threatens human existence, social responsibility is the least organizations can demonstrate to provide an optimistic future. Besides, the opportunities offered for exhibiting responsiveness to social, economic, environmental and ethical issues are numerous. At the end of the day, it is to their long-term interest to undertake socially responsible initiatives.
November 26, 2009
The benefits of running a socially responsible and ethical company
Organizations have moral, ethical, and humanitarian responsibilities in addition to their focus on earning a fair return for their shareholders. Corporate social responsibility (CSR) focuses on economic, public and social responsibility aiming at demonstrating a responsible behavior and responsiveness to social, economic, environmental and ethical issues. As society becomes more and more demanding, organizations take the action to protect and improve the welfare of society and to respond to the increasingly intense societal demands.
Building a reputation as socially responsible has a positive impact on organizational performance. CSR is related to doing successful and effective business and delivering high-quality products and services that can sustain a high-quality environment and high-quality relations to social networks. In this context, doing business is a human process.
Today, there are organizations that adopt social responsibility policies because of numerous motives. One of them is conducting ethical business, because, unlike what many people think, business ethics still exist. Besides, there are also business motives that are really strong. For instance, being highly respected as an equal opportunity employer is a strong business motive that assists an organization to reap a competitive advantage. A firm’s stakeholders perceive the organization as demonstrating responsible policies and implementing responsible strategies to solve social issues. Modern organizations believe that using business strategy as a tool for social and environmental change is an efficient way to integrate social goals into organizational objectives. Besides, some stakeholders do not just prefer that an organization is socially responsible, but insist on dealing with responsible companies.
The benefits for socially responsible organizations are various. First of all, a good reputation makes it easier for an organization to recruit and retain human capital. Employees are longer employed to the organization, reducing the costs of recruitment and retraining. This leads to better organizational performance as employees become specialized in their tasks and experienced, but they are also more motivated to offer to the organization and ultimately, more productive.
An organization’s actions are noted the most by organizational members. Executives who run the organization know its strengths and weaknesses and are able to exploit opportunities and anticipate threats that derive from the external environment. Organizational members interact on a daily basis with the stakeholders of the organization and the way the feel about the organization has a major and direct impact on how they perform their tasks and do their job at the end of the day. Therefore, being socially responsible does not benefit an organization only in the context of being esteemed by society, but first and foremost being appreciated by organizational members.
Firms that sell environmentally friendly products experience a high sales growth and typically, these products sell at a premium price. In the context of corporate social responsibility, many organizations develop new products and services, making a wider impact of their business on society. CSR makes organizations more competitive, while reducing the risk of damaging corporate reputation and profitability. Consequently, investors recognize organizations that are responsive to societal demands and are willing to finance their business.
Attracting new customers is costly for any organization because of expensive advertising campaigns or long lead times. As consumers become more sophisticated and demanding, organizations need to find more direct ways to acquire new customers, while reducing their investment in expanding their customer base. As there are customers who choose an organization based on their perceptions about it, corporate social responsibility can open the door for widening the customer base and adding to the perceived value added of customers.
The importance of corporate social responsibility in relation to how customers perceive it is growing. Goodpurpose global study of 2008 reports that 52 percent of global consumers are more likely to advertise a brand that supports a good cause over one that doesn’t, while 54 percent of global consumers would invest their money to an organization that promotes corporate social responsibility by supporting a good cause. Besides, 68 percent of global consumers would remain loyal to a brand during a recession if the organization exposed social responsibility, while 42 percent would select a brand with social commitment between two identical products in terms of quality and price.
Although the benefits of socially responsible behavior are many, there are also costs associated in the short-run. For instance, organizations that employ disabled people need to make organizational and technical adjustments, which increase operational costs. However, in the long-run, these costs are traded off by the benefits derived from building a strong image as a socially responsible organization and gaining a competitive advantage in the market.
Conclusively, corporate social responsibility offers an organization the opportunity to care for the environment and society. Bringing on positive social change through effective business strategies brings organizations and consumers together towards a mutual benefit through participation and involvement. When organizations are responsive to societal demands, they contribute to community and society beyond their functional benefits and they create strong emotional bonds with consumers. In return, consumers become more loyal and ultimately, profitability and business result increase.
Building a reputation as socially responsible has a positive impact on organizational performance. CSR is related to doing successful and effective business and delivering high-quality products and services that can sustain a high-quality environment and high-quality relations to social networks. In this context, doing business is a human process.
Today, there are organizations that adopt social responsibility policies because of numerous motives. One of them is conducting ethical business, because, unlike what many people think, business ethics still exist. Besides, there are also business motives that are really strong. For instance, being highly respected as an equal opportunity employer is a strong business motive that assists an organization to reap a competitive advantage. A firm’s stakeholders perceive the organization as demonstrating responsible policies and implementing responsible strategies to solve social issues. Modern organizations believe that using business strategy as a tool for social and environmental change is an efficient way to integrate social goals into organizational objectives. Besides, some stakeholders do not just prefer that an organization is socially responsible, but insist on dealing with responsible companies.
The benefits for socially responsible organizations are various. First of all, a good reputation makes it easier for an organization to recruit and retain human capital. Employees are longer employed to the organization, reducing the costs of recruitment and retraining. This leads to better organizational performance as employees become specialized in their tasks and experienced, but they are also more motivated to offer to the organization and ultimately, more productive.
An organization’s actions are noted the most by organizational members. Executives who run the organization know its strengths and weaknesses and are able to exploit opportunities and anticipate threats that derive from the external environment. Organizational members interact on a daily basis with the stakeholders of the organization and the way the feel about the organization has a major and direct impact on how they perform their tasks and do their job at the end of the day. Therefore, being socially responsible does not benefit an organization only in the context of being esteemed by society, but first and foremost being appreciated by organizational members.
Firms that sell environmentally friendly products experience a high sales growth and typically, these products sell at a premium price. In the context of corporate social responsibility, many organizations develop new products and services, making a wider impact of their business on society. CSR makes organizations more competitive, while reducing the risk of damaging corporate reputation and profitability. Consequently, investors recognize organizations that are responsive to societal demands and are willing to finance their business.
Attracting new customers is costly for any organization because of expensive advertising campaigns or long lead times. As consumers become more sophisticated and demanding, organizations need to find more direct ways to acquire new customers, while reducing their investment in expanding their customer base. As there are customers who choose an organization based on their perceptions about it, corporate social responsibility can open the door for widening the customer base and adding to the perceived value added of customers.
The importance of corporate social responsibility in relation to how customers perceive it is growing. Goodpurpose global study of 2008 reports that 52 percent of global consumers are more likely to advertise a brand that supports a good cause over one that doesn’t, while 54 percent of global consumers would invest their money to an organization that promotes corporate social responsibility by supporting a good cause. Besides, 68 percent of global consumers would remain loyal to a brand during a recession if the organization exposed social responsibility, while 42 percent would select a brand with social commitment between two identical products in terms of quality and price.
Although the benefits of socially responsible behavior are many, there are also costs associated in the short-run. For instance, organizations that employ disabled people need to make organizational and technical adjustments, which increase operational costs. However, in the long-run, these costs are traded off by the benefits derived from building a strong image as a socially responsible organization and gaining a competitive advantage in the market.
Conclusively, corporate social responsibility offers an organization the opportunity to care for the environment and society. Bringing on positive social change through effective business strategies brings organizations and consumers together towards a mutual benefit through participation and involvement. When organizations are responsive to societal demands, they contribute to community and society beyond their functional benefits and they create strong emotional bonds with consumers. In return, consumers become more loyal and ultimately, profitability and business result increase.
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