How Corporate Social Responsibility could contribute to an organisation’s ROI

by Audrey Teh


Corporate social responsibility (CSR) among businesses have transcended beyond “nice to have” ideologies and have emerged to become a staple in a company’s overall growth strategy. Now synonymous with responsibility, this vital relation demands that companies existing in the current market environment jump on the bandwagon to survive.

Today’s businesses operate with a similar core ideology, long-term. Strategies in formulation focus on sustainability are in its operations, sales or human resource management and at the heart of it, CSR has been found to be an integral component in the success management of these factors.

With increasing globalisation, the world has become a smaller place, and markets are more accessible than ever. Factor in the rising knowledge levels and today’s consumers have become more aware. According to a TIME poll conducted in 2009, 40 per cent of consumers said that they bought products or services because they liked the social values of the company. A typical consumer would now want to know that the product they are supporting comes from a company whose manufacturing processes do not pose any threat to the environment. The new age consumer concerns himself with the company’s track record, if it has fair practices covering fair wages, good working conditions and these relate back to the company’s reputation of which becomes a sure advantage to businesses with good CSR programs.

Aside from the consumer aspect, which is a large element no less, CSR programs also actively seeks to reduce operational costs in the long run. Saving the environment means cutting down on unnecessary wastages, and companies engaged in such practices see great reductions in areas such as utilities in the long run. Aside from being a cost saving venture, CSR also tackles the slippery issue of human capital attraction and retention. Human resource analysts have noticed that the most competent and skilled workers would want to be associated with companies that have good business practices and reputation. It is hardly surprising that companies with a strong overall sustainability performance are also recognised as the best employers in the market. Of course, from an investor standpoint, engaging in CSR has clear advantages in convincing investors who see CSR involvement as an indication of the company’s long –term potentials.

It is absolutely clear that CSR can generate top-line revenues for a company. It can inspire innovation. It can open new markets whilst acquiring new customers. It can recruit and retain employees. It can enhance brand and reputation. It can reduce costs. It can help raise share price. Or it can do none of these. While engaging in CSR undeniably reaps bountiful rewards, it has never been more important to systemise a way or measuring its return on investment (ROI). There is the old saying that what gets measure gets managed. Becoming a socially responsible company requires a significant amount of capital and resources investment and where capital is involved; there are shareholders to be answerable to. Essentially, top management have to shift away from the traditional mindset of thinking that CSR is a form of PR or worse, as philanthropy. A business is after all, a money making entity and it is the core responsibility of the management to generate returns for the shareholders. CSR is not to be dismissed as an optional “add-on” to business core activities but rather a fundamental way in which businesses are to be managed. Just as CSR is important, knowing how it contributes directly to your organisation’s ROI is equally as critical.

Of course measuring ROI proves to be a daunting task, for how do you measure something as intangible as employee engagement, reputation and brand perceptions? There is no exact science in quantifying ROI but there are useful metrics that can shed light to a systematic way of measuring ROI and these include brand reputation, energy efficiency and dollars saved and employee loyalty. The key point is to focus on the company’s core business objectives surrounding the following dimensions of value; monetary, financial, quantitative and qualitative. Monetary relates to accounting base value of cash in cash our, financial referring to translation of in-kind contributions of employee time, quantitative concerns itself with the number of sustainable products added to product line and qualitative could encompass marketing value through media mentions or changes to consumer attitudes.

Measure only what is applicable, for instance if your company’s core objectives is growth, measure progress on chose CSR strategies according to the impact of the initiatives on penetrating new markets or customer segments. With a plethora of metrics out there, it is easy to drown in its overabundance, therefore rather than aiming to measure as many metrics as possible, think of measuring the same thing and articulating its value in several different ways.

A recent PricewaterhouseCoopers study documented that companies that report their sustainability efforts get better returns on their assets than companies that do not, and there is no argument have CSR practices offer positive returns to a company. The pressing issue here is accountability. Managers have to understand how to account for CSR to actually drive the business to success, and these involve looking at CSR beyond just an ad hoc charitable activity and ultimately view it as a proper tool for competitive edge, and not just a burden on their bottom line and conscience.