'Corporate social responsibility' has good impact on business
'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