January 5, 2015
The value from investing into CSR
There is a common misconception among SMEs that Corporate Social Responsibility (CSR) is purely about philanthropy and that incorporating a CSR strategy will be too costly of an activity. There is some validity to the conception, as CSR does involve philanthropy and it does require a dedicated budget, however, it also goes beyond philanthropy to involve core business actions and decisions and can be a very effective strategic tool.
While there are often differences of opinion as to the true definition of CSR, one of the best ones that we have found comes from the International Organisation for Standardisation’s Guidance Standard on Social Responsibility, ISO 26000:
“…responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that
Contributes to sustainable development, including health and the welfare of society;
Takes into account the expectations of stakeholders;
Is in compliance with applicable law and consistent with international norms of behaviour; and
Is integrated throughout the organization and practised in its relationships.”
A good CSR strategy engages in a holistic approach with the organisation at the centre and incorporates seven core subjects; human rights, labour practices, the environment, fair operating practices, consumer issues, and community involvement and development.
In most cases, incorporating a CSR strategy is a voluntary practice, however, there is also increasing pressure on businesses to make a positive contribution to society (or at least minimise their negative impact). In Australia this pressure is primarily ‘societal’, however internationally, governments are starting to push for enforcement of certain CSR elements.
While many SMEs may not have the resources required to incorporate all seven core subjects, a ‘leaner’ approach can still have a positive impact on your business. Taking into consideration which elements will have more meaning for your market and your brand, you can determine which elements to focus on strategically in line with your business objectives. The benefits that can come from this include:
Strengthened brand reputation
Contributing positively to the good of others or the environment is always highly regarded and businesses that can show they are doing so can achieve a positive boost for the reputation of their brand. People buy from or work with businesses that they know, like and trust, and are more likely to buy from businesses that they see as being reputable and community focused. Investors are also partial to enterprises whose reputations are in good standing.
Enhanced trust and participation from stakeholders
Having open communication lines with internal and external stakeholders allows a business to understand how to better enhance its relationship with them. This allows for strategic focus on programs that will jointly benefit the business and the stakeholders. For example, creating programs that show concern for employee well-being can decrease employee turnover costs for the business and boost employee morale.
Reduced cost from efficiency improvements
Ensuring a more efficient use of resources saves money and has a less negative impact on the environment. Improving environmental practices such as reducing pollution and improving waste management within the business can lead to better financial performance through both increased revenues and lower costs. SMEs can incorporate simple programs such as recycling or upcycling to help mitigate their environmental impact.
The impact that socially responsible actions have for an SME may not be as all-encompassing as those initiated by larger corporations, however incorporating a well-planned CSR strategy can potentially make a positive impact where it matters most – in the SME’s own backyard.