When it comes to today’s most pressing environmental and social issues, more often than not, businesses are answering the call. Corporate Social Responsibility (CSR) is attributed to providing benefits such as making your company more attractive to top talent, increasing employee engagement and higher rates of productivity. However, will CSR pay off for your company?
Will CSR Pay Off?
According to Harvard Business Review, Fortune Global Companies spend close to $20 billion a year on Corporate Social Responsibility (CSR) activities. They also note that in 2015, 92% of the 250 largest companies in the world produced a CSR report. That’s up from 64% in 2005.
In 2015, 92% of the 250 largest companies in the world produced a CSR report.
Additionally, CSR has been attributed to having benefits for a companies bottom line through attracting and retaining top talent, increasing employee engagement and even lowering an employee’s salary expectation. To see how profitable CSR can be for a business, we’re taking a look at two different studies.
CSR Study #1 – Toward an Understanding of CSR
The first study is from Daniel Hedblom, Brent Hickman and John List who look at how much a company’s CSR strategy influences the work ethic and productivity of its employees. To test this, they launched an actual company and hired people online to perform data entry and analyze photos from Google Street View.
Their first test was to recruit employees from 12 different cities across America using Craigslist. They divided the participating employees into two groups. One group was told that the company’s purpose was for social good with a mission to increase access to education for underprivileged children. The second group was told the company was a regular business with no philanthropic agenda. In addition to altering the company image, they also altered the starting pay wage from $11-15.
The results are quite striking. The company that portrayed an image of social good saw a 25% increase in applicants. Additionally, using the $11 – 15 dollar salary range, they noted that it would take increasing the salary by one-third – from $ 11 to $ 15 – in order to see the same number of job applicants. Finally, the workers that were recruited by the social good company analyzed more photos at a faster rate and made fewer mistakes.
The company that portrayed an image of social good saw a 25% increase in applicants.
This study clearly shows that companies who say they are dedicated to social good attract more applicants who produce a higher quality of work and can be paid a lower wage. However, there’s another point to consider.
Study # 2 – Intentions for Doing Good Impact Doing Well
The second study comes from Lea Cassar and Stephan Meier of the National Bureau of Economic Research. They worked with an Italian firm and hired around 3,000 workers on Amazon Mechanical Turk (mTurk) to create taglines for products that the company could use on it’s website.
In a vignette study, the participants were divided into two pools and each presented with a different scenario. The first pool was told that the CEO would donate a portion of company profits to charity only after conducting market research and confirming that the donation would be profitable for the firm. The second pool was presented with a scenario that the CEO would donate a portion of company profits to charity without doing market research, simply because it was “the right thing to do.”
The respondents viewed the company who made a charitable donation strategically – only after confirming that the donation would be profitable – as less generous, less attractive, less socially responsible and said they would be less likely to accept a lower wage from the company.
Companies with successful CSR campaigns genuinely want to provide social value and care about their impact – not just do it for profit.
This study indicates that a company’s intentions for giving are important as well as the actual impact of their donation. In other words, companies with successful CSR campaigns genuinely want to provide social value and care about their impact – not just do it for profit. If employees think a company is engaging in CSR strictly for profit, then they are less likely to put in the extra effort.
CSR for the Win!
After considering both studies, it’s clear that developing a CSR strategy is a balancing act. While profiting from a CSR campaign is a tangible business goal, if it’s the main goal of a company, then they run the risk of it backfiring. Companies must remember that their employees genuinely care about the “why” behind their CSR program and develop give-back strategies from a place of truly wanting to make a positive impact.