The benefits to the organisation
One reason why companies increasingly take CSR into their overall planning is that it is becoming clear to many that, potentially, the costs involved are outweighed by the benefits.
Traditional business thinking assumed that profit should be the true bottom line, but there is increasing evidence to suggest that including people and planet in a triple bottom line can enhance profits, rather than lessen them. In other words, ethical considerations should not be seen as, at best, a tedious necessity, but as potentially profitable.
Access to capital
Finance houses and venture capital providers are increasingly looking for CSR values to be embedded within the organisations they fund. The same is true for investors on the stock market, including pension funds keen to make ethical investments. Increasingly, these investors see CSR as an important factor in reducing the risk of their investments, and thus will not invest in companies that do not have CSR firmly on their agenda.
A range of studies has shown that there is a direct correlation between responsible business practices and positive financial performance. This correlation is influenced by internal and external stakeholders and the extent of their influence. In some instances, however, important stakeholders, such as users of a product or service, may be based locally, but perceived as having little or no power/influence, as was highlighted recently in an article by Ian Worthington (see Want to know more?).
Access to the ethical market
The growth of the ethical market in the UK is helping business to realise the added value of engaging in the responsible business agenda. In the UK, in 2006, consumers spent £2 billion on products and services, such as low-energy light bulbs and fair trade or organic products, that featured social and environmentally-friendly attributes.
Lower operating costs
Environmental initiatives undertaken as part of a wider CSR programme can reduce operational control costs and lead to greater resource efficiencies and thus to decreases in wastage and disposal costs. For human processes, engagement in the area of flexible working patterns and work-life balance schemes can, in the long term, lead to reduced absenteeism and increased retention of employees, saving the business both money and time in terms of recruitment and training.
A organisation’s reputation is based on trust among its stakeholders, yet several studies have shown that society no longer simply trusts businesses. A very strong and positive reputation in the area of environmental and social responsibility can help an organisation to build this trust and enhance its image.
Greater productivity and quality
Building a CSR programme to encourage staff to be responsible for their actions with regard to environmental impacts can reduce the risk of incidents occurring. Companies that invest in good working conditions for staff, while promoting sustainable consumption and procurement choices and engaging with their supply chain, can experience a decrease in defects and production of fewer unsuitable products.
Improved recruitment and retention of staff
Staff are becoming increasingly aware of the impact of their organisation on the world around them, and many would prefer to work for an organisation where that effect is positive. Before the September 2008 economic downturn, it was quite popular for many, including recent graduates, to seek to work for responsible organisations. Now, it is unclear if this behaviour has changed and, if so, how.
What seems to be the concern of many is securing a job. They may view CSR as not a mainstream part of business operations, but as an aside you can tap into at a convenient point. Further, with some employees questioning ethical decisions, it is unclear if shared values form part of most companies’ operational mindset.
Lower operational risk
Incorporating non-financial risks into the business risk register helps organisations to manage the chance of such risks occurring and this potentially reduces operating costs. These risks are known as SEE risks – social, ethical and environmental risks. To undertake a SEE risk register, it is useful to ask your stakeholders for their input. To this end, stakeholder dialogue is a useful exercise as it helps a business to identify ‘blind spots’ and areas of weakness, highlighting potential business risks.