Corporate social responsibility, or CSR, is the theory that businesses should go beyond their simple legal duties to include contributions to society. It sounds like a nice idea, but many may ask: "Does the firm really benefit financially from corporate social responsibility?" The answer is a resounding yes; corporate social responsibility can increase financial performance in several ways.
Reduced Employee Costs
Firms that engage in corporate social responsibility will have a better relationshipswith their employees. This begins with the recruitment process; people are more interested in working for a firm that contributes to society and less interested in working for a firm that causes harm. This can continue to motivate employees as they work for a firm. As a result, firms that practice corporate social responsibility will have more satisfied employees and less employee turnover. This reduces the costs of wages and benefits and can increase employee output.
Increased Brand Value
An important benefit of CSR is that it can increase the image of a brand. For example, a paper products company might promote its use of recycled papers and actively engage in reforestation products. This would allow the company to show that, compared to other paper companies, it is better for the environment. This can increase the image people have of the product and, thereby, increase sales while reducing the need to spend on advertising and promotions.
Reduce Public Relations Costs
In order to be successful, firms must maintain their relationships with external stakeholders. These can include local communities, non-governmental organizations and governments. Maintaining a positive image with stakeholders can require expensive public relations campaigns. Corporate social responsibility can show these external groups that a firm is committed to enhancing the community it operates in, making it unnecessary to invest in expensive public relations.
Overall Financial Performance
The most tangible benefit of corporate social responsibility is overall increased financial performance. Data from sources such as the Dow Jones Group Sustainability Index suggests that firms employing CSR outperform those that do not. This can arise from things such as increased reputation and image as well as cost savings that can occur as the result of corporate social responsibility initiatives. For example, an initiative to reduce the firm's negative influence on the environment can save money by reducing energy use.
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