2 CSR BENEFITS FOR THE COMPANY
2.1 Increase in Profits
A report released by Goldman Sachs (GSSustain, 2007) on six industrial sectors – energy, mining, steel, food, beverages and media – found that companies considered leaders in implementing environmental, social and governance policies designed to create sustained competitive advantage had outperformed the overall stock market by 25 per cent since August 2005. Within their own sectors, 72 per cent of these leading companies had outperformed their peers over the same period GS Sustain 2007 (GRAYSON et al., 2008).
CSR can contribute to an increase in profits by reducing costs on business processes. Porter & Kramer (2002) give the example of philanthropy directed towards a university on company related fields of competencies, leveraging its resources with local resources. Implementing an in-house training or research facility would often be far more expensive.
Nevertheless, as any business process alone, CSR is not a guarantee of corporate survival and profits. Indeed, the WWF report “To Whose Profit? Building a business case for sustainability” make it clear that while there are strong signs of a positive correlation between CSR and bottom line profits, companies that ignore CSR still prosper (CICERO, 2007). Furthermore, one of the main criticisms to CSR is the possible incompatibility of applying it fully when the very nature of a business is to make profit. Indeed, “competition” and the search for profit on a free market is a paradox with the rather more open and cooperative approach required by most CSR initiatives. This situation often leads to a cynical view of the true business motives with CSR. The consumer or even the community that gets the benefit of a CSR initiative might see this as an instrument to provide further profits to the business.
2.2 Brand differentiation
Brand differentiation is perhaps one of the most widely uses of CSR from a corporate strategy point of view, even in commodity markets. In marketing terms, within CSR brand promises need to be replaced by brand integrity (KOVÁCS, 2008). Building a brand reputation on the issue of CSR often requires a long term process and can be a competitive advantage difficult to be copy by competitors. At the same time, as argued by CEC (2002), bad social reputation flows quite fast downstream on the supply chain and can even hamper the operation of a given company depending on the sensitiveness of the consumer and local authority to corporate social responsibility.
2.3 Human resources attractiveness
It is increasingly hard to attract bright young talents to companies and even entire industrial sectors that do not have a good profile on CSR. Industries such as construction have bad public images and perceived as being dirty, dangerous and dull (3D’s), with adversarial relationships at all levels and great social and environmental insensitivity. Such situation makes it hard the recruitment of new young talents. Indeed, a Wall Street Journal Almanac Pol: of high school-aged vocational technology students ranked “construction worker” 248th out of 250 possible occupation choices, ahead of "dancer" and "lumberjack" and just edged out by "cowboy” (SANTOS, 2008).
2.4 Development of staff competences to deal with complexity
Dealing with complexity is an important asset on staff competencies, particularly when the company works in various geographical areas or when their product/service is subject to public scrutiny. It is also virtually impossible to emulate complex problems on the classroom or on artificial settings for learning activities. Thus, CSR initiatives can be seen as an instrument to generate such competencies which then could migrate to other functional activities throughout the business where complexity is present.
2.5 Reduction of risks through better stakeholder relationships
Corporate social responsibility is fundamentally a comprehensive multi-party effort that needs to involve stakeholders ranging from governments, non-governmental organizations to citizens and others (CANADA, 2006). The involvement of stakeholders can bring direct benefits on the reduction of risks on investments, particularly when local support is required to avoid business disruption. CEC (2001) argues that the familiarity of companies with the local actors, the local environment traditions and strengths is a strategic “social capital”.
2.6 Understanding the behavior of potential markets
Conventional marketing techniques have difficulties to capture the depth of requirements of certain markets such as low-income families and that in turn creates a burden to innovation in products and services. Thus, CSR initiatives can also help a company to rethink its products/services and even open new markets that were otherwise not seen as such by marketing personnel. Very importantly CSR initiatives help to bridge channels with the potential partners and consumers that can be accessed by the company on future business transactions.