On the occasion of the Law 4403/2016 on Non-Financial Information, which concerns the implementation of the European Directive on the incorporation of social and environmental data into the annual financial reports of large enterprises, the rhetorical -as critiqued by many- question resurfaced;
Is Corporate Social Responsibility (CSR) a luxury (“nice to have”) or a necessity (“must have”) for an organization?
More specifically, large public-interest companies with more than 500 employees, on average during the year, are required to include in their annual reports specific non-financial data regarding environmental, social, labor, transparency and anti-corruption issues.
Moreover, the Deputy Minister of Economy and Development, Alexis Charitsis, announced that a special Social Economy Fund will be set up to provide financial support to social enterprises (start-up aid, wage coverage, micro-credit, etc.). He also added that, Support Centers are expected to operate in each Region, in order to deliver dedicated services to social enterprises.
Taking into consideration these developments, the question raised above has been answered, whilst the dilemmas of regulatory or voluntary compliance with CSR practices and standards are rather old-fashioned. We are at a point where, it is widely acknowledged by organisations that CSR is no more a luxury. There are already a number of “levers” of pressure on businesses, which drive them into implementing CSR practices. Furthermore, the new law on integrating non-financial information into the Annual Reports, consists practically an affirmation of this trend.
The current financial crisis has significantly affected all those companies that are seeking ways to differentiate and stand out in the market. Those companies have recognized that the integration of CSR initiatives can offer them multiple benefits and competitive advantages with apparent and measurable effects. Specifically by sector, such benefits are:
1. Attracting Funds
According to the Global Sustainable Investment Review of the Global Sustainable Investment Alliance, variously labeled as sustainable, responsible or ethical investing, the field encompasses 26% of assets under management globally — almost $23 trillion (25% increase from 2014). The trend shows that there is a significant shift of investors’ interest to socially responsible companies, as they are recognized to have lower risk exposure and at the same time better growth prospects. Furthermore, considering that the providers of financial capital endeavor to maximize their benefits while minimizing any risks, they do not suffice to the company’s legal consistency. The majority of them, seek out evidence of sound corporate governance as illustrated in the context of a responsible business operation.
2. Increase Sales
Customers’ demand in combination with the intensity of market competition are major challenges and very often determine the future of a company. According to the GlobeScan Radar/BBMG Survey, 52% of the consumers say that they have already “punished” a company that acted irresponsibly to the environment and/or society. Therefore, companies demonstrating their respect to customer needs very often communicate systematically how they operate responsibly towards the society and the natural environment. In addition, the adoption of CSR programmes very often drives a company to develop innovative products, resulting in both increases in sales and marketing, contributing strongly to its economic growth.
Socially responsible companies are able to establish a clear point of brand differentiation that helps them shield from lower-cost competitors.
3. Employees Satisfaction
CSR has proven to be a key factor to improving corporate culture and reinforcing employees’ commitment to business goals. There is a strong culture of teamwork, as all employees are motivated to actively contribute to corporate CSR programs. Particularly, in times of economic instability, when employee performance can be dramatically affected, the implementation of CSR initiatives will help people to feel positively about their organization’s responsible behavior, thus strengthening their trust and overall satisfaction.
4. Environmental Care
By implementing environmental protection (“green”) initiatives, a company may discover a number of benefits. Those benefits go well beyond feeling good about caring for the environment. One of the biggest benefits of implementing green initiatives is cutting costs, particularly in regards to energy consumption. It can also increase company’s recognition for its environmental friendly efforts and even win awards, extending its brand notoriety. Adopting environmentally friendly methods can set your business apart from your competitors (provide competitive advantage) and attract new customers who seek to buy products and services from environmentally friendly companies. Furthermore, green initiatives motivate employees to work as a team towards a common purpose.
5. Social Acceptance
Corporate Social Responsibility is more than just donating money or printing double-sided to save trees; it’s about contributing to the health and welfare of society, operating transparently and ethically. A socially responsible company, enjoys the trust of its stakeholders; thus having the local community as an ally, a company can respond or even overcome any challenges that may arise due to a financial crisis.
Based on all of the above, the development and implementation of CSR initiatives can only yield benefits for a company, especially in times of economic crisis. Integrating CSR initiatives into everyday business undoubtedly carries two additional key benefits:
• Reduction of potential risks that the business may face and, at the same time,
• Recognizing opportunities that will produce successful financial results.
Furthermore, companies that have incorporated CSR initiatives in their business activities, stand to gain great value in reputation, including trust, more willing recommendations, a buffer against scandals and other reputation busters, as well as a greater likelihood for customers to use their products and services. Clients, employees, and other stakeholders continue to place more importance on social and environmental causes. Those companies that chart their course in the long run, through strategic planning, are able to understand that CSR is not a luxury but is an investment, with a short depreciation period and substantial benefits.
*This article was published in Growth Edge magazine in November 2018 .