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Corporate Social Responsibility

Executives See Link Between CSR and Profitability


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By Melissa J. Anderson

According to a new study published by Adam Friedman Associates, corporate executives are likely to believe there is a link between Corporate Social Responsibility and profit.

The authors of the paper, Julia Bonner, NYU, and Adam Friedman, NYU and Adam Friedman Associates, believe that this represents a shift in how CSR has been viewed over time. They write, “A significant finding clearly is the strong link between CSR and profitability within many corporations. While CSR may have initially been perceived as a ‘soft’ discipline within the corporate structure, today it has evolved into a policy that directly affects profitability.”

The study also showed that CSR decisions are usually made by top level executives in the C-Suite or Board of Directors, with the input of other groups – such as legal and PR. Additionally, they suggest, in the future, CSR departments may become obsolete as a CSR philosophy is simply subsumed by the organization.

Who Leads CSR?

The study of Fortune 1000 companies revealed that, most of the time, a company’s CSR agenda is set by senior management. The vast majority of respondents (82 percent) said the CSR process is mainly influenced by members of the C-Suite and Board of Directors.

Secondarily individuals in legal (51 percent) and public relations (45 percent) influence CSR decisions. Finally, leaders in marketing (30 percent) and sales (24 percent) are involved in CSR decision-making.

The survey also asked respondents whose opinion matters most when evaluating CSR efforts. According to the respondents, C-suite executives are the most important here (86 percent), followed by other employees (76 percent). After that, the evaluations of customers (73 percent) and investors (69 percent) are also considered. Additionally, companies look to government feedback (52 percent) and the media (51 percent) to measure the success of CSR initiatives.

According to the researchers, it is particularly interesting to note the weight given to assessments of CSR programs by customers in the survey. “The level of transparency and amount of information available to consumers has made their opinions increasingly important.”

CSR and Profitability

According to the survey, CSR is taking on more of a strategic focus. Respondents said the top reason for engaging in CSR was reputation (88 percent). Next, respondents cited competitive positioning and social consciousness (71 percent). Over half of respondents (56 percent) noted profitability as a reason to engage in CSR.

On the other hand, respondents believed not doing CSR would harm a company – by tarnishing its reputation (67 percent) or decreasing its profitability (20 percent). The authors write:

“The results of these questions indicate that reputation and competitive positioning clearly play a large role in the development of a company’s CSR programs. Surprisingly, however, profits and CSR are often connected, and many businesses evaluate the relationship between these two variables when developing strategy.”

Additionally, the researchers felt that the role of CSR is evolving within companies. The study showed that environmental issues top the list of CSR-related work, followed by program focuses like health, education, human rights, labor, and safety. “The answer to this question shows the scope of CSR broadening to include more social programs in addition to environmental programs,” note Bonner and Friedman.

They write that some respondents expect the way CSR is organized into companies to change. As CSR becomes more engrained as a philosophy by workforces, CSR departments may no longer be needed. “Businesses should look at CSR as a growing function, and should also find ways to envelop CSR strategies into all areas of business to maximize the potential of their CSR strategies,” the authors write.

One way to ensure this outcome, they continue, is to include CSR factors in employees’ job descriptions and performance reviews.

By expanding CSR accountability beyond the C-suite, business leaders can ensure employees throughout the workforce take ownership of the issue. Other research has suggested that integrating CSR into other areas of the corporate structure can help build employee engagement. Since executives clearly see a profit motivation for CSR, the employee engagement aspect should encourage leaders to approach it more holistically.

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