Connecting Corporate Social Responsibility to the Bottom Line
This article written by Magid’s Rick Garlick was originally published on Engagement Strategies Media (ESM).
Corporate Social Responsibility is not just about charitable giving—it is becoming not only a competitive advantage but an organizational requirement.
Corporate Social Responsibility (CSR) and sustainability efforts have become a staple of business. In a 2019 report, the Governance and Accountability Institute research team determined that 86% of companies in the S&P 500 Index® published sustainability or corporate responsibility reports in 2018, compared to just under 20% in 2011. By not having a self-initiated CSR strategy, some industries risk increased regulation and efforts to force them into taking actions they would be better initiating themselves.
While being a good corporate citizen is socially desirable, businesses exist primarily to generate revenues and profits for their stakeholders. The good news is that the world has evolved so that being socially responsible and being profitable are no longer mutually exclusive but rather, intricately intertwined. Recently, the World Economic Forum published metrics to demonstrate corporate commitment to environmental and social issues. However, more work needs to be done to determine how this commitment pays off for the companies themselves in increased shareholder value.
Put simply, customers, employees, investors, and other stakeholders want to engage with companies with whom they share common values and respect. This principle has become an accepted fact with businesses of nearly every size and industry. But how much is this worth? How can you demonstrate the business value of these investments? Are there ways to get more business value out of these initiatives?
While the importance of CSR and sustainability efforts are accepted, these programs often do not realize their full potential for the following reasons:
CSR efforts are scattershot and not unified around a central strategy. While there are an endless range of causes in which to invest, companies can spread their money around in such a way that CSR activities seem reactive rather than strategic. In other words, the best at CSR focus on depth, not breadth.
CSR strategies are not synched with overall brand messaging. An effective CSR strategy should not require stakeholders to question how it is aligned with the mission, vision, and values of the company it represents. The CSR strategy should be a natural extension of the brand itself.
Communication strategies are not optimized, either in terms of messages or channels. While companies may be doing some very good things, often their stakeholder groups are not even aware because the company has not thoroughly researched the message or communication channel effectiveness. If this is the case, the business benefits of your CSR initiatives are going to be minimized.
Stakeholders have differing priorities. Customers, employees, and other stakeholders may not share the same degree of passion regarding various causes. What is important to internal stakeholders may not resonate the same with customers. This is particularly true in cases of corporate activism. Companies should research and understand both internal and external stakeholders’ passion for various CSR activities and determine the greatest intersection with brand and company mission and values.
Recommendations for Optimizing Your CSR Program
How do you make sure your CSR is delivering the most value to your company and its stakeholders? The process can be described in six steps.
Step 1: Identify the stakeholders of interest. The process of optimizing your CSR program is considerably complex, particularly given the number of key stakeholders who may be impacted by CSR actions. First, companies need to identify the stakeholders on whom they place the greatest importance in considering CSR activity. For instance, a company that seeks a source of ongoing talent could focus on educational programs in high schools or colleges serving low-income or minority communities.
Step 2: Identify priorities for each stakeholder group. Find where there is common ground and where there is divergence. In some cases, external stakeholders may not share the same value as internal stakeholders, which is why the discovery process is critical to avoid an insular view. Look for activities that help align the interests of stakeholders.
Step 3: Create and validate messaging. Next, create a strong messaging strategy and validate its effectiveness. Most critical to this process is defining the social challenge or opportunity and how the company’s approach will be effective in addressing it. Make these activities and their outcomes part of the organization’s central story, not an appendage.
Step 4: Identify the most effective channels. It is tempting to believe the channels that are most expedient and available are the best for communicating your CSR activities. However, you cannot assume that your multiple stakeholders consistently engage in these channels.
Step 5: Monetize the value of your CSR strategy. Since CSR activities involve significant investment, it is important to measure and maximize the return. How many customers have you retained or acquired due to CSR activity? How has your CSR attracted or retained employees? How have brand perceptions changed?
Step 6: Prioritize action. The final step is to translate the information into specific strategic action. The result is a CSR program that will have maximum impact on your stakeholders, your shareholders, and society and, most importantly, will enable you to continuously reinvest in and grow your program.
Corporate social responsibility initiatives are here to stay: more organizations will be under pressure to report on their activities. This is good for both business and society. But if a CSR program is not well-informed through insights among all relevant constituencies, you will, at best, be leaving money on the table, or worse, throwing money away.