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October 20, 2021CSR and Profitability: How Doing Good Increases Your Returns
Have you ever thought something along the lines of “I want to engage in corporate social responsibility, but it’s a cost to the business with an uncertain ROI”? You’re not alone. Many business owners and HR leaders are hesitant to adopt corporate social responsibility (CSR) practices due to the misconception that CSR is a cost center that doesn’t offer a valuable return on investment (ROI) for businesses.
In actual fact, the opposite is true. CSR is widely considered to be a cost-effective means of boosting your business’ bottom line. As we’ll explore in this article, research shows that CSR and profitability go hand in hand. Just take it from William Clay Ford, Jr., the Executive Chairman and Chairman of the Board of Ford Motor Company, who said:
“Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success.”
As we’ll explore in this article, research shows that CSR and profitability go hand in hand. If you’re interested to learn more about how CSR can help to boost your bottom line, this short explainer on CSR and profitability is a must-read.
What Research Says About CSR and Profitability
It seems almost too good to be true that your company can do good and boost its bottom line. However, this isn’t just conjecture. There is a mountain of evidence in the form of case studies and research that demonstrates the strong value CSR can provide your bottom line.
If you’re after a comprehensive overview, we recommend giving Peter Baines’ book, Doing Good By Doing Good: Why Creating Shared Value is the Key to Powering Business Growth and Innovation, a read.
In his book, Baines presents several case studies that demonstrate the tangible impact that CSR can have on your bottom line. He explores how the companies are simultaneously creating shared value in meeting the challenges of society and bringing in strong economic returns.
The link between CSR and profitability is echoed by experts at McKinsey, who noted that:
Social responsibility and sustainable profit go hand in hand, now more than ever. The depth of the economic challenges we currently confront means the first is needed to deliver on the second.
Customers Prefer to Buy from Purpose-Driven Companies
A primary way that CSR can boost your company’s bottom line is by enabling it to pivot to a more values and purpose focused mode of conducting business. By doing so, your business will be able to capture more leads, and in turn, enjoy greater profit margins.
So just how much impact will making such a pivot have on your bottom line? The Everyone’s Business Reputation Tracker study found that more than half (55%) of the public are more likely to buy from a company with a clear social purpose.
More globally, data from the 2021 Reputation Institute Corporate Activism Report brought to light that nearly two-thirds (63%) of global customers not only prefer to buy goods and services from companies that “stand for a purpose that reflects their values and beliefs”, but also avoid those that do not.
Being Purpose-Driven Leads to Greater Growth and Profits
So how does this translate to greater company growth and profits?
To answer this, let’s take a look at IBM’s 2020 study. The study identified that most customers (81%) fall into one of two segments:
The Two Main Types of Customers
- Value-driven customers (41%): Customers who are primarily concerned with getting their money’s worth and select brands based on price and convenience.
- Purpose-driven customers (40%): Customers who select brands based on how well they align with their personal values, and who are willing to “walk the talk” when it comes to sustainability, changing their behavior, and paying more for brands that get it right.
Interestingly, the researchers noted that while value-driven customers emphasise “getting their money’s worth”, purpose-driven customers are willing to pay a premium for products and services that align with their values and lifestyle.
In other words, purpose-driven customers are far more profitable to capture than those who are simply looking to get their money’s worth.
Corporate social responsibility has also been shown to boost companies' bottom lines in a variety of other ways. For example, a study by Kantar found that companies committed to purpose grew valued 2.5 times more than brands with little or no purpose. Another study showed the link between CSR and improved stock returns. Researchers have also found that CSR performance magnifies the degree to which innovation relaxes financing constraints and increases both the innovation output level and innovation efficiency.
Successive studies have also linked CSR with improved customer engagement and trust, as well as greater employee engagement and retention rates. CSR has even been shown to support companies to hire top talent and help companies to develop a good reputation and build brand equity. All of these benefits that CSR provides contribute to greater returns for businesses.
Needless to say, there are many other links research has identified between CSR and profitability. But the research highlighted above gives you a solid understanding that CSR can indeed be profitable for businesses, including yours.
Final Thoughts
The implication is that if you want to boost your bottom line, it’s clearly worthwhile to adopt CSR practices to better align your company with customers’ values. Doing so will help attract more purpose-driven customers to your business—who are a customer demographic who are willing to spend more to support values-aligned brands.
Plus, you’ll be contributing to the greater good while you’re at it. That’s a win-win for your company and the community!
So what should your next moves be if you want to create an effective CSR program? Start using an employee giving platform like Catalyser. Catalyser’s all-in-one, feature-packed employee giving software is designed to support your company to achieve greater employee engagement and social impact success.
With transparent and cost-effective pricing tiers, it also won’t break the bank. In fact, you’ll find that Catalyser is one of the most affordable ways to run your CSR program.
So why not try it out for yourself? Sign up for a free demo and see why leading businesses are using Catalyser to strengthen their CSR.