Is your business all about CSR (corporate social responsibility) and CC (corporate citizenship)?
Or does your CFP (corporate financial performance) beat out CSP (corporate social performance) every time?
Acronyms aside, most companies are actively engaged in sustainability and environmental policies, including us here at RainCatcher P&S Ltd and EcoGrid Ltd with eco-friendly products at the heart of what we do.
The general notion is that “going green” could increase your profits, but is it that simple?
Amongst the mounting evidence that businesses which are building sustainability into their core strategies can be more profitable is a 2014 CDP report which presents a link between business leadership on climate change and their profitability. This study of S&P 500 companies (large US firms from a vast number of industries) suggests that the ones actively managing and planning for climate change secure an 18% higher return on investment than companies that aren’t – and that’s 67% higher than companies refusing to disclose their emissions at all.
The research that’s out there indicates that overall CSR/CC/CSP does offer some benefit to a firm’s CFP (those acronyms just came back) and thus to a firm’s profits. It can be argued that the better the social practices, the better respected a company is in the marketplace, bringing about some nice perks like higher sales and enhanced loyalty from customers and employees alike. So, why wouldn’t you join in?
One reason might be the level of profit you can realistically attain.
Cristiana Manescu’s independent findings reveal no negative effect on profitability amongst businesses researched but in the few cases where a positive effect was observed, the profits were only minimal. Despite the clearly positive performance found across the large S&P 500 companies earlier, a EIU report from 2008 found that most everyone else struggles to show a return on their investment from socially responsible activities.
Does CSR really mean higher profits or does higher profits enable more CSR spending?
Your green initiative will require tight co-operation from management and all levels of the business having to be on the same page – that’s a lot of effort and dedication. It could also wind up being a lot of strain on the wallet too, with long term investments and costly conversion. Through all of that, what was your motive in the first place?
Sustainability is an essential ingredient to modern business, reaping the rewards from paying attention to all of our stakeholders – but the point of it all is the future of the environment and planet with our sustainability efforts helping to reduce our collective impact on the world.
If the motive for CSR is based on increasing profits then the point has been missed. Instead that value should come as a natural outcome of ethical practices at the foundation of your business. It’s the right thing to do regardless.
With the competitive edge a social and ethical stance can bring, and of course profit being fundamental to a firm’s existence and growth, it’s not surprising this debate continues to fires up time and time again.