Research by Business in the Community revealed that FTSE companies that actively managed and measured corporate social responsibility (CSR) issues outperformed peers on total shareholder return by between 3.3% and 7.7% throughout the period 2002-2007.
So I was alarmed to hear at a recent meeting of senior business leaders that almost half were re-considering their CSR strategies, despite having invested considerably in this area in recent years. It seems that just as the business case for corporate responsibility gains widespread endorsement, it is being challenged to prove itself once again.
As we face up to the greatest economic crisis since the 1929 Wall Street Crash, the knee-jerk reaction is to abandon business functions that are seen as a ‘luxury’. Forward-thinking schemes to up-skill staff or encourage diversity in the workplace are suddenly considered as nice add-ons.
It is not ‘nice’ to have a diverse workforce, it makes business sense to have an employee profile that reflects and therefore understands your customers. It is not ‘nice’ to have a skilled workforce – it will be the driving force of your business. It is not ‘nice’ to introduce health and wellbeing schemes, it will increase the productivity and effectiveness of your staff.
The pressing danger is that those companies that silently abandon previously high-profile schemes will not be able to pick-up where they left off, thereby setting the CSR agenda back years. A hiatus in commitment sends a clear message to all stakeholders that it was just hot air and not central to core business strategy. Once this credibility has been lost with employees, customers or shareholders, it will be near impossible to regain and cause lasting damage to the business.
The organisations that have taken the right approach to CSR are the most likely to remain committed, because they can see the cost benefit. If anything, recent events demonstrate that being responsible is more important than ever. Responsible businesses have confidence in the products and services they are buying or selling, internal controls are in place to reduce risk and maximise opportunity, and the business will be focused on long-term success (economic, social and environmental) rather than just short-term returns.
Ultimately, corporate responsibility can contribute to improving and sustaining financial performance. There is a real value for businesses in developing their people, trading responsibly, protecting the environment and working in partnership with their local communities. Being a great employer has so many business benefits from creating loyalty in the community in which you operate, to ensuring you recruit and retain the best talent.
Strength of character
Managing a business through a downturn is about people the forward-thinking leaders demonstrating strength of character and inspiring confidence, and the employees whose commitment, productivity and skills gain competitive advantage.
Investing in people is the best investment a business can make in challenging times and building new skills will put business in a strong position as the economy recovers. As we increasingly become an economy built on talent, it is vital to push for investment in the talent needed to compete in a globalised economy.
CSR policies have to be realistic, robust and relevant. If they are not, they simply won’t stand-up in the economic downturn. I truly hope that businesses see sense and those executives heading up various projects stand firm against pressure to slash their budgets.