'Corporate social responsibility' has good impact on business

Corporate social responsibility (CSR), which includes community development, has become an important issue in modern society.

Although many Indonesian companies have yet to recognize it, the concept has been widely adopted by the world's business players.

While there is no single, commonly accepted definition of CSR, it generally refers to business decision making linked to ethical values, compliance with legal requirements, and respect for people, communities and the environment.

According to research carried out by the United States-based Business for Social Responsibility (BSR), a growing number of companies have recognized the business benefits of CSR policies and practices.

Activities related to CSR programs have a positive impact on business economic performance, and are not harmful to shareholders values. Below are some of the advantages that can be gained from CSR practices as reported by BSR in its website. More information can be found in CRB's website www.bsr.org.

Improved financial performance

Business and investment communities have long debated whether there is a real connection between socially responsible business practices and positive financial performance. Several studies have shown such a correlation.

- A 199 study, cited in Business and Society Review, showed that 300 large corporations found that companies that made a public commitment to rely on their ethics codes outperformed companies that did not do so by two to three times, as measured by marked value added.

- A 1997 DePaul University study found that companies with a defined corporate commitment to ethical principles did better financially than companies that did not.

- A recent longitudinal Harvard University study found that "stakeholder-balanced" companies showed four times the growth rate and eight times the employment growth compared with companies that were shareholder-only-focused.

- Similarly, a study by the University of Southwestern Louisiana titled, "The Effect of Published Reports of Unethical Conduct on Stock Prices", showed that publicity about unethical corporate behavior lowered stock prices for a minimum of six months.

Reduced operating costs

Some CSR initiatives, particularly environmentally oriented and workplace initiatives, can reduce costs dramatically by cutting waste and inefficiencies or improving productivity.

For example, many initiatives aimed at reducing gas emissions that contribute to global climate change also increase energy efficiency, reducing utility bills. Many recycling initiatives also cut waste disposal costs and generate income by selling recycled materials.

Enhanced brand image and reputation

Customers are often drawn to brands and companies considered to have good reputations in CSR-related areas. A company considered socially responsible can benefit both from its enhanced reputation with the public, as well as its reputation within the business community, increasing a company's ability to attract capital and trading partners. For example, a 1997 study by two Boston College management professors found that excellent employee, customer and community relations were more important than strong shareholder returns in earning corporations a place on Fortune magazine's annual "Most Admired Companies" list.

Increased sales and customer loyalty

A number of studies have suggested that there is a large and growing market for the products and services of companies perceived to be socially responsible. While businesses must first satisfy customers' key buying criteria -- such as price, quality, appearance, taste, availability, safety and convenience, studies also show a growing desire to buy based on other value-based criteria, such as "sweatshop"-free and child-labor-free clothing, lesser environmental impact and absence of genetically-modified materials or ingredients.

A 199 should this be 1999? landmark study conducted by Environics International Ltd, in cooperation with The Prince of Wales Business Leaders Forum showed that:

- 90 percent of people surveyed want companies to focus on more than profitability.

- 60 percent of respondents said that they form an impression of a company based on its social responsibility (defined as regard for people, communities and the environment)

- 40 percent responded negatively to, or said they talked negatively about, companies that they perceived as not being socially responsible.

- 17 percent of respondents reported that they had actually avoided the products of companies they perceived as not being socially responsible.

- The 1999 Cone/Roper Cause Related Trends Report determined that American consumers and employees solidly and consistently supported charitable causes related to activities and that companies saw benefits to their brand and organization's reputation and image.

- A 1997 study by Walker Research found that price and quality were equal. 76 percent of customers would switch brands or retailers if a company were associated with a good cause. A 1998 survey of marketing directors at 170 leading UK companies found that 34 percent of the directors believed that linking marketing to charities could enhance brands. --JP