The Potential Business Benefits of Corporate Social Responsibility

Being socially responsible is increasingly important for modern organizations. As consumers become more demanding and investors become more sophisticated, corporate social responsibility (CSR) becomes increasingly significant for businesses that need to demonstrate responsiveness to social problems.

The extent to which an organization can benefit from corporate social responsibility varies depending primarily on the nature of the business. However, business literature has identified a strong correlation between social performance and financial performance. Research from the Institute for Business Ethics suggests that organizations that demonstrate corporate social responsibility are more likely to be commercially successful in the future. Besides, over 90 percent of the FTSE 100 companies have an explicit policy on ethics, while over 50 percent of the organizations surveyed in a 2007 study by 'Personnel Today' had an explicit policy on corporate social responsibility. Although organizations should not focus on profit when implementing socially responsible policies, the long-term business benefits associated to such practices are numerous.

Explicit policies on corporate social responsibility can be addressed to several departments within the organization. Usually, such practices encompass the activities of human resources, marketing, business development, or finance departments and the benefits derived are based on the strategies implemented.

In particular, the potential business benefits derived from the implementation of corporate social responsibility are the following:

> Risk Management

Modern organizations implement risk management strategies to decrease or even eliminate the risk posed on the organization by a variety of practices associated to several potential threats. Risk management is of vital importance to many corporate strategies. Organizations that have made strong efforts over the years to build a good reputation and have spent a lot of money to maintain it through product development and customer loyalty strategies, may be ruined is seconds due to a corruption scandal (Enron scandal) or an environmental accident (Chernobyl disaster). Such incidents draw the attention of the media and may cause irrevocable damage to the reputation of a firm. The only way to anticipate such events is to embed social responsibility into organizational culture in order to offset such risks.

> Product differentiation

Organizations that want to remain competitive and viable in today's marketplace need to offer differentiated products. Through product differentiation, organizations aim at achieving a competitive advantage by increasing the perceived value of their products relative to the perceived value of the products of their competitors. Particularly, for organizations that implement socially responsible policies, product differentiation can satisfy the unmet needs of consumers offering both financial and business benefits to the firm. Firms that offer environmentally friendly products experience higher sales growth than firms that sell conventional products, and usually such products sell at a higher price. Besides, firms that offer unique value propositions to consumers differentiate their products in consumers' minds and contribute to building customer loyalty based solely on ethical values. Therefore, in the context of corporate social responsibility, organizations develop new products aiming, not only to become more competitive, but also to make a greater impact on society through their ethical practices.

> Employee motivation

Organizations that are socially responsible are more likely to recruit and retain their human capital easier. A 2007 research by Kenexa Research Institute (KRI) that surveyed employees from six countries (USA, Brazil, China, India, UK, Germany), suggests that when employees have a positive view for the organization's CSR strategies, they are more willing to work for it, participate to its efforts, align with its culture and recommend it as the best place to work. Employee satisfaction deriving from corporate social responsibility leads to higher productivity, higher employee retention rate, better organizational performance, and ultimately, higher profitability.

Conclusively, although the benefits of corporate social responsibility cannot be explicitly measured as they are primarily based on the nature of the business, they are numerous and they cannot be neglected. Particularly, in an era that the protection of the environment is imperative and global warming threatens human existence, social responsibility is the least organizations can demonstrate to provide an optimistic future. Besides, the opportunities offered for exhibiting responsiveness to social, economic, environmental and ethical issues are numerous. At the end of the day, it is to their long-term interest to undertake socially responsible initiatives.