The Positive Economic Return of Responsible Business
Feb 23
Today we are experiencing the greatest crisis of confidence
and trust in business and the markets since the 1929 depression.
This is a key factor contributing to the present economic downturn. The current financial situation causes significant business
and social challenges. We must deal with these problems and furthermore must act in ways that minimise the damage to long-term
business value.
The present crisis has many causes which I believe they show the importance that responsible business principles play in strengthening and restoring the damage caused to relationships with the market, our clients , our employees and suppliers.
There is strong evidence from numerous research studies that
responsible management of environmental and social issues
improves financial performance. Companies which have been
measured when they managed their corporate
responsibility through the Corporate Responsibility Index Tool
(CR Index) exhibited a better financial performance than
the rest of the industry.
Good corporate governance is instrumental in guiding responsible business practice, and contributes to
• positive workplace management,
• marketplace responsibility,
• environmental performance, community engagement
• and sustained financial performance.
If we ignore any of these critical areas we will probably experience an adverse impact on the overall performance and the competitive advantage of our business.
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Mar 06 at 15:50
Companies that exercise responsible management and are very active in CSR they manage to keep employee’s morale and pride high. An employee in such a company is very proud and motivated to work in such a company and he feels that his work is not just another work but in fact his/her company offers a great deal to the society as well. In difficult times the first thing that a company faces is the low morale and the demotivation of people. Keeping your employees proud and motivated, means that they have enough energy to put in their work as well. They feel obliged in a way to contribute to all these positive responsible actions of the company. They are more innovative, more efficient and feel that their work has a meaning. Responsible management and CSR is not only indirect publicity it is also substantial source of motivation.
Posted by Kourounakou Zoe
Mar 06 at 15:51
A potential benefit of CSR is that it can improve a company’s reputation and branding and this in turn improves the prospects for the company to be more effective in the way that it manages communications and marketing in efforts to attract new customers and increase market share. In addition, companies that employ CSR related perspectives and tools tend to be businesses that provide the pre-conditions for increased loyalty and commitment from employees. These conditions can serve to help to recruit employees, retain employees, motivate employees to develop skills, and encourage employees to pursue learning to find innovative ways to not only reduce costs but to also spot and take advantage of new opportunities for maximizing benefits, reduce absenteeism, and may also translate into marginally less demands for higher wages.
An interesting conference about CSR Best Practices will be held 15/3/2010 in OTEAcademy http://www.csr-bestpractices.gr
Posted by Evgenia Moutsopoulou
Mar 06 at 15:52
The positive economic return of responsible business comes as no surprise. In our current economic state, consumers are looking for organizations that care about humanity. It’s no secret; a business’ main objective is to profit. It is also no secret that a loyal consumer, regardless of economic times, will “choose” to support companies with a sincere interest in the welfare of both their community and the world in which they reside.
Posted by ROCHELLE WHITLOW
Mar 06 at 15:52
My humble observations from the literature is that the relationship between CSR and financial performance is inconclusive. Many studies supporting claims on either side of the divide. This is why it is imperative that CSR programs focus on aligning firm strategies with social cause.
Posted by Rabih Helou
Mar 06 at 15:53
Great article Dimitris,
In this culture, the appearance is that those who do the right thing are not rewarded. (In this life.)
I look forward to more information like this to be published and applied. (The application of the principles after knowledge still may be difficult)
This information has tremendous implications on how regulated or self regulated the business industry can be, and will be in the future.
These are long term goals that can be applied to communities, families, and individuals. We always have to be ever vigilant against the desire for the short term imaginary gain.
Thanks again.
Posted by Paul Platner
Mar 06 at 15:53
To put it in another way, there is a strong correlation between financial performance and corporate responsibility. This remark probably highlights the point that companies who have enough sophistication to calibrate their operation so that it leads to better economic results, have a better understanding of the multifaceted nature of cause-effect situations in society, present and potential, and thus deliberately enhance their social role and profile.
Posted by Nikos Stathopoulos
Mar 06 at 15:55
Hi Dimitris,
I believe it and can explain the way it works. First, there is no loss to a company that engages in responsible management of environmental and social issues simply for the fact that the benefits and returns will far out way any investment because part of the investment is to prevent the cost of lawsuits and comply with regulations as applicable so savings are already being made. In addition, all the stakeholders whose values are aligned with that of the company will identify and further support such companies and the relationship becomes stronger which, means more sales, income & revenue. This actually links in with Branding, Core Values and Corporate Social Responsibility (CSR).
Have a great weekend!
Posted by Marian Nielsen
Mar 06 at 15:56
In addition to social and environment CSR, I would add corporate initiatives such as Diversity and similar areas to this story. Perhaps the forward thinking companies that implement these, and have measurement in place, may well be companies that also measure and are more strategic in other ways – all of it leading to better financial performance. In addition to measurement, many companies with strong CSR also seem to have strong talent management programs, which also ties to the bottom line. Sad to say, many firms in tough economic times cut back on talent initiatives, diversity programs and other CSR. One Big Four CEO I previsouly worked with noted that he saw a direct correlation from cutbacks in those areas in prior years and vowed to keep these and similar issues high in his priority list.
Good topic — when you tie CSR to the bottom line, it makes more sense to the Board and to the CEO. Everything is measured these days.
Posted by Cindy Morgan-Olson
Mar 06 at 15:57
To quote a Slate.com article ( http://www.slate.com/id/2213037/ ):
–Corporate charity, [Berkeley prof and former Secretary of Labor Robert] Reich charges, is window dressing with a negligible effect on social problems—and it’s actually pernicious. “The message that companies are moral beings with social responsibilities diverts public attention from the task of establishing laws and rules in the first place,” Reich writes. “Meanwhile, increasingly, the real democratic process is being left to companies and their lobbyists.” He’s not speaking in hypotheticals, either; Larry Summers, Obama’s new chief of the National Economic Council, joins in to point out that the problem behind Fannie Mae and Freddie Mac was that “the illusion that the companies were doing virtuous work made it impossible to build a serious case for regulation.”
****
So, I’m of a mixed mind about it. I don’t want just window dressing, but businesses are utimately out for their own best interest. The only way they will change and make real, positive impact is if customers talk with their money when it comes to socially responsible activity by a company, that will get more attention than anything else.
Posted by Andrew Bartlett