Corporate Social Responsibility and Profit Responsibility: How to Do Good and Well
When you consider the importance of corporate social responsibility, you must understand how to balance it with profit.
This blog post was originally published in March 2020, and it was revised in April 2023.
As you scroll through your social media feeds or flip through the television channels, you may notice that many companies have shifted the content of their ads. The goal isn’t simply to sell their products, but rather to also highlight corporate social responsibility.
It’s a smart move. A recent study on corporate social responsibility shows that 66% of Internet users over the age of 18 think more brands should take public stands on social issues. And 52% of those surveyed indicated that they would spend more money with a brand that aligns with their social values. Moreover, there is evidence that suggests a better return on assets associated with corporate social responsibility.
Importance of Corporate Social Responsibility
If you’ve been thinking of how to incorporate social responsibility into your company, take a page from history. The concept of corporate social responsibility isn’t new. In fact, you can trace the origins of business humanitarian and social welfare efforts back to the Industrial Revolution. In the 1950s, the term “corporate social responsibility” was coined, and the concept of integrating sustainability, charitability and philanthropic goals into a business’s mission and vision has grown increasingly popular in the ensuing decades. So why should you consider engaging in socially responsible initiative?
- It will improve your brand equity. When you do good, it sends a positive message to consumers. It shows that you care about society, the environment and governance. Companies that send this message can garner more positive press and publicity for their efforts-and their products.
- It will increase your customer loyalty. The above study confirms that consumers prefer to do business with socially responsible brands. Moreover, 61% of respondents said they would recommend a socially responsible brand to a friend, it is important to gain a positive social impact as there’s no better advertisement than word of mouth.
- You can gain favor with millennials. As the most populous living generation, 3 millennials are a coveted consumer group and they prefer brands that take a stand. Over 70% of surveyed millennials said they’d rather engage with socially responsible businesses.
- You increase employee satisfaction. Those same millennials also want to work for companies and an organization that believes in corporate social responsibility and act upon it. Employees are more loyal to companies they believe to be socially responsible and feel more fulfilled and have a purpose in their jobs. Particularly in times of low unemployment, if you want to attract the best and brightest, you need to stand out from other organizations. Being socially responsible is one important way.
- It’s the right thing to do. There is a strong moral argument that companies which gain revenue from the communities in which they operate should give back. It’s that simple.
Companies that Handle Corporate Social Responsibility Well
Most major companies, from Coca-Cola to IBM, have realized the importance of corporate social responsibility, not only for society, but for their bottom line. They do social good well, and it’s paid off. Here are a few companies from which to take notes:
- Telefonica – This Spanish, multinational telecommunications company has created partnerships with associations for older adults to teach them about the benefits and use of new technologies. This helps the aging population stay more engaged, and it helps the company tap into a new customer base.
- HanesBrands – Hanes distributes school supplies to children in the Dominican Republic who attend public school, and it also operates a health brigade in Honduras that provides free care and after-school tutoring, as well as continuing education opportunities for adults. The company has received nine consecutive awards from the Honduran Foundation for Corporate Social Responsibility and seven consecutive awards from the Mexican Center for Philanthropy for its efforts.
- Novo Nordisk – The pharmaceutical company has worked toward reducing its carbon dioxide emissions for years. They’ve recently invested in a solar energy farm in North Carolina and have partnered with a Danish energy company that manages an offshore wind farm. They’ve not only reduced their environmental impact, but they’ve also boosted the renewable energy market in Denmark.
How to Implement Corporate Social Responsibility to Impact Profit
So how can you do good as well as these companies? The key to successful implementation of corporate social responsibility is to align your initiative with the goals of the company:
- Step 1: Understand the goals of your company. What do you want to achieve-employee retention, a better reputation, or brand awareness? And what are the goals of your stakeholders? Identify the common goals among all groups, and from there, choose a sustainable effort that fits into these goals.
- Step 2: Create a task force. If no one is dedicated to your sustainability effort, it won’t succeed. Dedicate a team or task force to measuring the performance of your effort, as well as motivating and communicating with company employees about the desired results and milestones achieved along the way.
- Step 3: Identify appropriate partnerships and build a positive relationship. Just as Novo Nordisk found partnerships in the renewable energy sector, you too should look for the appropriate partners that can help you reach your goals. It takes a village to create real change that lasts.
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- Lougee, B. and Wallace, J., (2008) The Corporate Social Responsibility (CSR) Trend, Journal of Applied Corporate Finance. 20 (1), 96-108.