Businesses need to make a profit to stay in business. To do that, they need to ensure both their customers and their employees are onboard and engaged. In today’s world, this is about more than simply providing a good product and good working conditions; it’s about how a company becomes part of the greater community and practices social corporate responsibility.
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There are so many companies that have come on board to promote socially responsible practices. For example, the Pret A Manger sandwich shop founded in London, England, gives their daily leftovers to homeless shelters. Patagonia, the outdoor clothing company, donates 1% of it’s sales to environmental charities. Zappos, the shoe company, donates shoes to charitable organizations. Ben & Jerry’s gives out five social change grants to organizations every year.
Clearly, engaging in corporate social responsibility is becoming increasingly important for any business, no matter what industry they are part if or where they are located. And clearly, there are plenty of companies setting a precedence. The obvious reason is that being socially responsible is the right thing to do. However, there are a number of other reasons why embracing corporate social responsibility will improve profitability of your company.
1. Helps to expand the target market
Consumers prefer to be associated with businesses that show corporate social responsibility in terms of sustainable manufacturing, ethical practices and standards, and positive social messages. In fact, 81% of global consumers feel strongly that companies should help make the environment better. Millennials in particular are a significant force driving this change, with 85% of them believing companies should bear social responsibility.
These are the consumers that want to know that their coffee is Fair Trade, their cosmetics are cruelty-free, their clothing is ethically manufactured, and that companies engage in green shipping and carbon offsetting. This is more important to them than the price of the product. And companies will draw these consumers in by implementing corporate social responsibility practices that support a better world, better working conditions, and a safer environment.
2. Makes customers happier
The above goes for current customers, as well as the general consumer. Even customers that have been loyal will not necessarily stay loyal to a company or brand that is not willing to improve their social responsibility practices. Since it costs a company five times more to attract new customers than to nurture and retain current customers, this is a significant factor when a company considers engaging in socially responsible practices.
In addition, when a company increases their customer retention rate by just 5%, it translates into a 25%-95% increase in profits. Add to that the fact that these loyal customers are more likely to bring people to a brand they like and approve of via word-of-mouth and upping your corporate social responsibility game makes good business sense.
3. Corporate Social Responsibility boosts employee retention and investment
At a time when the talent pool is not always in a company’s favor, attracting and retaining strong, dedicated employees has become increasingly important. Again, millennials are leading the way with this initiative. A full 64% of American millennials strongly consider the corporate responsibility of a company when deciding whether to work there. In addition, 64% will not take a job with a company that does not have strong corporate social responsibility practices.
Plus, when companies encourage their employees to support their own social initiatives and allow them the time and resources required to make their own mark, this improves employee loyalty. It also makes them happier, more engaged, more motivated, and more productive and helps bring team members and departments together to develop stronger working relationships. All of this goes toward increase productivity and profits.
4. Warrants charging a premium
When a company operates with a strong level is social responsibility and sustainability, they are adding value to their brand and their products. This makes them more exclusive and justifies charging premium prices for their products. This, in turn, raises the valuation of the business and encourages new investors to sit up and take notice.
5. Corporate Social Responsibility increases investor interest
Raising capital and finding investors can be one of the most difficult tasks companies face in today’s world. In addition to the increased valuation of a business, socially responsible companies can gain greater access to capital via investment firms that specialize in investing in socially responsible companies. This gives them access to capital that traditionally weren’t available to businesses.
Ultimately, we live in a time where corporate social responsibility is no longer just a nice add-on to a company’s agenda. It has become a significant factor in a company’s ability to stay competitive in today’s marketplace. Companies that don’t make the shift to corporate social responsibility are facing not just a loss of business, but imminent failure as customers and employees focus on companies that are making the relevant changes needed to do business in today’s world. The question is: are you one of those companies?
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