Skip to Content

5 Reasons Corporate Social Responsibility Is Smart Business

The ideal goal of corporate social responsibility is aligning a company’s efforts toward improving society and the environment with its business purposes. The world of business can be ruthlessly competitive, and unethical or socially irresponsible behavior in pursuit of short term profits is certainly not unheard of.

But business analysts increasingly insist that corporate social responsibility isn’t just for improving reputation: it’s part of smart business operations management. Consumers are more socially conscious and more inclined to make choices of products and services delivered by companies that are committed to making a positive impact on society and the environment. Here are five of the reasons why corporate social responsibility is smart business.

1. Investors Are Interested in Ethical and Socially Responsible Businesses

Investor preference for socially and ethically responsible business investments is growing, and this is resulting in higher share prices and happier shareholders for companies where social and environmental responsibility are integrated into the fabric of business operations management. In fact, predictive analytics using big data from the field of investing shows socially responsible corporations can look forward to an extra 4.3% annual return on equity.

2. Socially Responsible Corporations May Have an Easier Time Hiring

It’s impossible to ignore news stories about how Millennials are taking over the workforce and emerging as the strongest consumer demographic. Transparency in business is highly valued among Millennials, perhaps because it’s almost impossible to get away with unethical or unsustainable practices without being found out in the social media age. Millennials demand social responsibility from businesses, whether they’re the businesses they buy from or the businesses they work for. Corporate social responsibility could be a key to hiring the cream of the Millennial crop.

3. Customers Are Willing to Pay More for Socially Responsible Brands

A Nielsen retail sales study from 2014 found that brands demonstrating commitment to sustainability grew at rates of around 4%, while those that did not saw growth of less than 1%. Consumers are increasingly willing to pay more for socially responsible products, with two-thirds of respondents to a Nielsen global online survey saying they would pay more for products and services from companies committed to improving society and the environment. Commitment to the environment can sway consumer choices among 45% of consumers, while commitment to social values can sway 43%.

4. Corporate Social Responsibility Bears Long Term Benefits

More organizations are concerned about corporate social responsibilities and are willing to make these responsibilities a part of their business model because they can see the long term benefits: better corporate image, employee loyalty, and customer loyalty. Rapid globalization has sharpened competition, and today remaining relevant requires more than huge profits, but differentiators that resonate with consumers, like commitment to sustainability and improvement to society.

5. If Nothing Else, It Can Help Organizations Avoid Penalties

Finally, there’s a practical reason why corporate social responsibility has a prominent place in business operations management. Ethically and environmentally responsible business behavior makes it more likely that a business will avoid regulatory penalties, litigation, and the ire of activists. Companies that commit to a good faith effort to implement anti-corruption compliance and demonstrate environmental responsibility are more likely to experience leniency from the government should they be found in violation of ethical or environmental regulations.

Corporate Social Responsibility and Brand Relevance

Corporate social responsibility is becoming not just something that’s “nice to have” but an essential component of business operations management. Ultimately, it’s smart business, because ethical and responsible business practices add value beyond just products and services. The potential return on investment is significant, as socially responsible businesses establish brand relevance, are able to hire top talent more easily, and satisfy both customers and shareholders without disappointing one or the other. Ignoring social corporate responsibility may occasionally work to improve short term profitability, but it works against achieving long term business goals.