CSR Initiatives Bring Profit When Companies Adopt Them Whole-heartedly

By CSR Pulse

Over the last two decades, corporate social responsibility (CSR) has grown in meaning. “Today it is an outlook which takes into consideration future generations and which makes companies focus on the management of economic, social and environmental factors”, writes US business journalist Matt Palmquist in a piece for Strategy+Business. The economic factor revolves around making money for the shareholders. The social and environmental factors involve practices which contribute to society’s well being and aim to preserve our planet.

The number of companies investing in CSR initiatives is rising. However, the question still remains – does CRS just serve to refine a company’s image or can it really contribute to the bottom line?

A study by Clark University researchers, Zhihong Wang and Joseph Sarkis, on the relationship between sustainable supply chain management and corporate financial performance indicates that yes, companies can make more money by adopting CSR practices. This, however is subject to one condition – they should approach CSR with patience and only implement activities that incorporate both the environmental and social aspects of CSR. Tackling CSR with an air of indifference and not taking a holistic approach, could waste both time and money.

Wang and Sarkis’ study covered 411 US companies from various industries featured on Newsweek’s Green Rankings list for their CSR efforts from 2009 through 2011, analysing these companies’ return on assets and investment. The investigation found that on the whole, those companies which took care to implement both environmental and social supply chain management practices did well in terms of profit. The study stressed the importance of perseverance, pointing out that it takes time for CSR endeavours to take off and create successful results. Improvement in the financial performance of companies showed in two years after a thorough CSR initiative was implemented, the study indicated.
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What the study also found is that those companies that did not implement thorough CSR strategies incorporating both the social and environmental aspects, did not see an adequate return on the investment they made.

This may come as a surprise as launching both social and environmental programmes would cost more to a company than rolling out a single programme. Yet implementing the two together might actually cost less on average than implementing just one, and companies can reap the benefits of both programmes, the authors added.

Consumers like companies which show their care for society and the environment –  hence implementing social and environmental programmes simultaneously may bring greater financial returns to a business. Also, joint implementation could improve a company’s ability to learn and adjust to new programmes and could result in the reduction of administrative and training costs once challenges that the implementation poses are met.

All in all, Wang and Sarkis’s advice is clear: companies should include both the social and environmental aspects in their CSR initiatives, while managers should remember that it may take a while before the programmes start generating profit.