The Benefits of Running a Socially Responsible and Ethical Company

Organizations have moral, ethical, and humanitarian responsibilities in addition to their focus on earning a fair return for their shareholders. Corporate social responsibility (CSR) focuses on economic, public and social responsibility aiming at demonstrating a responsible behavior and responsiveness to social, economic, environmental and ethical issues. As society becomes more and more demanding, organizations take the action to protect and improve the welfare of society and to respond to the increasingly intense societal demands.

Building a reputation as socially responsible has a positive impact on organizational performance. CSR is related to doing successful and effective business and delivering high-quality products and services that can sustain a high-quality environment and high-quality relations to social networks. In this context, doing business is a human process.

Today, there are organizations that adopt social responsibility policies because of numerous motives. One of them is conducting ethical business, because, unlike what many people think, business ethics still exist. Besides, there are also business motives that are really strong. For instance, being highly respected as an equal opportunity employer is a strong business motive that assists an organization to reap a competitive advantage. A firm's stakeholders perceive the organization as demonstrating responsible policies and implementing responsible strategies to solve social issues. Modern organizations believe that using business strategy as a tool for social and environmental change is an efficient way to integrate social goals into organizational objectives. Besides, some stakeholders do not just prefer that an organization is socially responsible, but insist on dealing with responsible companies.

The benefits for socially responsible organizations are various. First of all, a good reputation makes it easier for an organization to recruit and retain human capital. Employees are longer employed to the organization, reducing the costs of recruitment and retraining. This leads to better organizational performance as employees become specialized in their tasks and experienced, but they are also more motivated to offer to the organization and ultimately, more productive.

An organization's actions are noted the most by organizational members. Executives who run the organization know its strengths and weaknesses and are able to exploit opportunities and anticipate threats that derive from the external environment. Organizational members interact on a daily basis with the stakeholders of the organization and the way the feel about the organization has a major and direct impact on how they perform their tasks and do their job at the end of the day. Therefore, being socially responsible does not benefit an organization only in the context of being esteemed by society, but first and foremost being appreciated by organizational members.

Firms that sell environmentally friendly products experience a high sales growth and typically, these products sell at a premium price. In the context of corporate social responsibility, many organizations develop new products and services, making a wider impact of their business on society. CSR makes organizations more competitive, while reducing the risk of damaging corporate reputation and profitability. Consequently, investors recognize organizations that are responsive to societal demands and are willing to finance their business.

Attracting new customers is costly for any organization because of expensive advertising campaigns or long lead times. As consumers become more sophisticated and demanding, organizations need to find more direct ways to acquire new customers, while reducing their investment in expanding their customer base. As there are customers who choose an organization based on their perceptions about it, corporate social responsibility can open the door for widening the customer base and adding to the perceived value added of customers.

The importance of corporate social responsibility in relation to how customers perceive it is growing. Goodpurpose global study of 2008 reports that 52 percent of global consumers are more likely to advertise a brand that supports a good cause over one that doesn't, while 54 percent of global consumers would invest their money to an organization that promotes corporate social responsibility by supporting a good cause. Besides, 68 percent of global consumers would remain loyal to a brand during a recession if the organization exposed social responsibility, while 42 percent would select a brand with social commitment between two identical products in terms of quality and price.

Although the benefits of socially responsible behavior are many, there are also costs associated in the short-run. For instance, organizations that employ disabled people need to make organizational and technical adjustments, which increase operational costs. However, in the long-run, these costs are traded off by the benefits derived from building a strong image as a socially responsible organization and gaining a competitive advantage in the market.

Conclusively, corporate social responsibility offers an organization the opportunity to care for the environment and society. Bringing on positive social change through effective business strategies brings organizations and consumers together towards a mutual benefit through participation and involvement. When organizations are responsive to societal demands, they contribute to community and society beyond their functional benefits and they create strong emotional bonds with consumers. In return, consumers become more loyal and ultimately, profitability and business result increase.