Generally, CSR is seen as something that will benefit a business’ reputation if it has clear policies about its efforts to reduce its impact on the environment, to contribute to the local community where it operates, to do its bit for charity and to have an ethical employment policy.
The CSR emphasis tends to be on “green” and charitable initiatives, but it is obviously not enough to set up policies, it should also act on them and publish its results. Essentially CSR is about doing business in a way that is sustainable for itself, the community and the wider environment.
How far should a business go and can CSR improve profitability?
There is an argument that encouraging every single employee to participate in a business CSR can also have an impact on their behaviour outside of the work place. If, for example, the business makes every effort to minimise packaging and to recycle everything it can and makes it easy by placing recycling bins where employees can easily use them, the argument is that they will consider using the same practices at home.
Similarly, challenging suppliers to operate in a sustainable way will reinforce sustainable activities not only for them but also for the business that is using them. This is where SMEs often need a CSR Policy since larger clients often require their suppliers to have one.
The effects on profitability may be harder to quantify, but as customers become more selective and concerned about the ethics of the businesses from which they buy, there is likely to be an advantage to the business in terms of a better reputation and increases in orders and sales. Indeed not having a CSR policy may be a bar to becoming a supplier to some corporate clients.
At the moment, businesses are operating in a very uncertain economic world thanks to the decision of the UK to leave the EU, the time negotiations are expected to take and the volatility of £Sterling which is affecting both import and export prices.
Signs of a more protectionist and anti-global mood in the US and some European countries are also making business conditions more difficult.
So, anything that can help a business to reduce its costs is likely to be welcome and therefore CSR environmental initiatives, such as reducing waste and excess packaging, switching to energy-efficient forms of heating, or switching to more fuel-efficient delivery routes can also have an impact on reducing business overheads and improving both efficiency and profitability.
CSR is more than simply an exercise in improving business reputation. It can have real, tangible benefits.
One of the three themes in the Government’s Green Paper on corporate governance is to investigate ways of strengthening the voices of employees, customers and suppliers at board level. The consultation period for this ends on 17th February.
Depending on the measures subsequently introduced on this it is possible that a company’s commitment to CSR may become even more important.