Corporate social responsibility: Good for community & bottom line

Measuring the impact of social responsibility programs on bottom line is becoming increasingly important

Phoebe Krueger

You would be hard-pressed to find a person or a business against the idea of companies giving back to their communities. Many companies give back – both philanthropically, through the people and planet-friendly practices that make up corporate social responsibility (CSR) programs. Indeed, a quick search of most corporate websites would reveal that corporate philanthropy is one of the most mentioned activities in their press releases and social media posts.

While you can find feel-good photos of employees in bright “volunteer” t-shirts and corporate leaders presenting oversized checks to local nonprofits, the photos only tell part of the story. They don’t provide the answer to this question: What does a company get out of its corporate social responsibility program?

Measuring return on investment (ROI) on CSR programs is difficult because the field is relatively new and data collection has been challenging and inconsistent. While you can gather solid empirical data on a new product or service, the same measurement tools are harder to come by regarding CSR activities.

As the CSR field grows, measuring its impact on the bottom line becomes increasingly important. Project ROI, a report about measuring CSR benefits, was recently commissioned to draw on the knowledge of top CSR practitioners and review over 300 credible studies related to the financial impact of CSR activities. This information was synthesized into one comprehensive report. The resulting report had some rather impressive, if not startling, findings about just how valuable these activities are to the bottom lines of many businesses.

Here are five valuable highlights within the report (which is accessible at www.projectroi.com):

1 – Improves employee retention: Well-managed CSR programs can reduce employee turnover by 25 to 50 percent. If a company loses four employees per month, each earning an average salary of $45,000 annually and conservatively estimates a 20 percent turnover cost, then the annual turnover cost would be $432,000. If even 25 percent of those employees were to stay, in part due to a well-managed CSR program, the company would save $108,000 in turnover costs. Turnover costs may include: advertising; interviewing; screening; hiring; onboarding; lost productivity; lost engagement; customer service challenges; training costs; and cultural impact. Retention benefits alone can often pay for the costs of a robust CSR program.

2 – Bolsters brand and reputation value: You will notice a line on many companies’ balance sheets reflecting goodwill and intangible assets – this is an estimate of the value of their brand and reputation. Strong CSR management practices can account for seven to 11 percent of a firm’s brand and reputation, making this a sizable asset worth protecting. For organizations that do not currently have CSR programs, implementing these programs can add value to their businesses.

3 – Strengthens investor relations: Investor confidence increases when firms invest in and manage intangible assets including strong CSR programs. These investments demonstrate an integrated approach to innovation, talent and reputation. They also strengthen confidence in the firm’s future performance in the areas of management, corporate culture, competitive advantage, and employee engagement. A well-managed CSR program can be compared to an insurance program that protects intangible assets and investor confidence.

4 – Increases client commitment: Although CSR practices are shown to play a part in the purchasing behaviors of the majority of clients, they truly impact the buying decisions of an estimated 20 percent of the client base. This core 20 percent will not only use a company’s products or services, but they will also promote them to others. Strong CSR programs increase clients’ trust in a company while decreasing their trust in that company’s competitors.

5 – Exemplifies your corporate values: Well-designed CSR programs strategically align with an organization’s core values, allowing the organization the opportunity to strengthen client and shareholder perspectives. Pacific Continental Bank chose to use its new Vancouver location to demonstrate this final takeaway. Changes to the traditional banking model would suggest banks should have smaller branches with fewer amenities because more and more transactions occur online. Pacific Continental Bank bucked this trend and chose to build a larger office in Vancouver that aligned with its core values. Strong CSR practices are in place throughout the office including: a 48-person Community Room, which can be used by nonprofits and community groups at no cost; environmentally sustainable features like composting in the kitchen and water stations for refilling water bottles; and employee-friendly amenities such as standing workstations and secure bike parking.

The case for corporate social responsibility as a bottom-line focused strategy is becoming increasingly clear. What used to be known as a “nice thing to do” in the business community is becoming a “critical thing to do.”

Phoebe Krueger is vice president and relationship banking officer for Pacific Continental Bank in Vancouver. She can be reached at phoebe.krueger@therightbank.com.

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