There was a time when people dreamed of working in large corporations, of distributing business cards of famous brands that were designed to generate very high financial gains. This may be falling behind. The traditional business model that aims only at a profit is surely outdated, and we are already beginning to see changes for professionals, companies and consumers and the need for a real CSR strategy.
Still, many professionals have doubts about the effectiveness of the social-oriented business model. To bring some clarity, we decided to talk about some of the most common myths we have heard around the topic. Here they are:
The social business must generate profit and maintain growth performance. It is essential that the organisation offers equally competitive solutions, pay your bills on time, and keep growing. But such growth can be combined with positively impacting society. Its commitment is to generate profit to increase social impact and not just to distribute among investors and shareholders. The Neste Corporation, listed in third place on the Global 100 ranking of the most sustainable companies in 2019, is a good example of this. Neste is a petroleum refinery and marketing company that has more than 50% of its investments in the development of renewable biofuels. The results are promising. Even though their biofuels business represents only a quarter of their revenue, it’s currently half of their profits.
People feel more open with companies with a socially responsible profile. Many job seekers currently assess the profile of companies. John List, an economist at the University of Chicago who has studied the economic impact of CSR, has concluded that companies that advertise their CSR practices attract about 33% more in application rates. According to him, this can even lead to corporations paying a lower salary to their candidates. He explains that many people are willing to accept a low-paying job as long as the company is engaged with social responsibility activities. Of course, this is not a rule. As in any business, it is necessary to generate the revenues required to pay employees well. The cause may be the professionals’ main interest, but they need to be adequately rewarded. The idea of low pay to gain more profit goes against the CSR business model.
The size of the corporation is hardly an obstacle when it comes to CSR. The California based company Numi Organic Tea is an example of this. With revenue of around $15 million, the company uses 100% biodegradable or recyclable packaging and has a waste reduction award program. According to Numi Organic Tea’s CEO, Ahmed Rahim, every single operation done in the company has sustainability in mind. Such actions led Numi to be recognised as one of the top 5 businesses in California for waste-reduction, which brought great publicity for the company.
In fact, CSR might be a great way to differentiate a small business from the bigger ones and bring some positive attention. After all, when it comes to price competition, it can be hard to beat large chains. But if a small business is socially conscious, it may win over consumers that are willing to pay a bit more to support a company that is giving back to society.
Although many CSR projects have similar values to corporate philanthropy, these are two different business models. While corporate philanthropy aims to donate profits to charitable causes, CSR projects are intertwined with the corporations’ values and mission, leading to a continuous commitment to society. More importantly, the CSR business model has a broader scope and involves the overall attitude of the corporation towards its customers, employees, as well as the local community.
Nowadays, millennials represent a large part of the consumers and are an essential target market. The generation born between 1980 and early 2000 represents around 25% of the USA population. More importantly, this segment of the population has different consumers’ habits when compared to previous generations. According to The Deloitte Millennial Survey, 50% of millennials declare that they would take a pay cut to find a work position that matches their values. Another study done by Cone Communications found that 71% of the American millennials hope corporations will take the lead on the social issues they consider important, and half of them would defend a purpose-driven company if people spoke badly about it. All this data is just a glimpse of what is yet to come. Every day, more and more people show a strong preference for investing and working for social-driven corporations.
CSR strategy is now a must-have for any business that pursues long-term profitability. Ultimately, people want to support in many different ways companies whose values align with their own. Soon, taking a stand against social injustice and giving back to society will be a mandatory part of business.