Can You Make a Profit and Be Socially Responsible?

What is corporate social responsibility?

Corporate social responsibility (CSR) is the effort a business makes to take responsibility for its actions. Companies that practice CSR follow a sustainable business model and constantly consider how they impact the environment and society. 

Ann Skeet, senior director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University, emphasized that CSR practices reflect a company’s values and relationship to society. “[CSR] can encompass activities that are strictly voluntary, such as volunteering and philanthropic efforts, and also areas that are now being lightly regulated, such as those known as ESG, strategies companies deploy to address environmental, social and governance concerns,” Skeet explained. “Small businesses should approach corporate social responsibility holistically by engaging in activities that align with their mission and core values and reinforce ethical business practices.” 

CSR can include various initiatives, including the following:

• Reducing your business’s carbon footprint with clean energy solutions
• Being proactive about labor laws and benefits
• Supporting charities locally or globally 

Generally, CSR initiatives fall into several broad categories, including the following:

• Environmental responsibility
• Ethical responsibility
• Philanthropic responsibility 
• Economic responsibility

Can CSR increase company profits?

Research has shown companies that fully integrate CSR into their operations can expect to achieve profitable growth and see sound financial returns on their investments. Companies committed to CSR can also reduce employee turnover because their practices appeal to high-level talent.

Companies can increase profits by incorporating CSR practices because many customers pay attention to how organizations react to social and political issues. Some may boycott companies with perceived negative values. Companies prioritizing CSR promote positive values, ultimately increasing customer traffic and company profit. 

Additionally, some socially responsible practices actually cut business costs. For example, investing in solar panels can save businesses significant electricity costs; the cost of buying and installing them is typically paid back in three to five years.

“The businesses that thrive tomorrow will be those that solve society’s problems today,” noted Abdullah Choundhry, co-founder of Arbor, a B2B carbon accounting platform. “CSR isn’t about perfection — it’s about making each business decision with both profit and social impact in mind.”

What are the benefits of CSR for companies?

Businesses of all shapes, sizes and locations are adopting socially responsible policies — and for good reason. Consider the following benefits of implementing CSR practices and policies: 

• CSR appeals to customers. Today’s consumer is socially conscious, and this awareness directly influences their purchasing decisions. If you’re not prioritizing responsible business practices, your customers won’t buy from you. “[CSR] activities afford companies the opportunity to deepen their relationships with customers and the community in which they operate, positively enhancing a company’s reputation for civic leadership in a way that reinforces its business strategies,” Skeet explained.
• Customers spend more with socially responsible companies. Customers are highly aware of local, national and global issues. These issues influence their buying decisions; they will buy more from companies showing concern and taking positive action over issues that resonate with customers. Research from PDI Technologies found 80 percent of consumers are concerned about the environmental impact of the products they buy. Additionally, 80 percent are willing to pay more for sustainable products. Among them, 71 percent would choose a sustainable product over a similar product if it costs less than $10, while 27 percent would choose the sustainable option regardless of price.
• CSR can improve your company’s public image. A positive reputation is priceless to businesses. Successful companies deliver high-quality products and services at a good value and provide excellent customer service and after-sales support. Adding involvement in civic causes can take a company’s public image to the next level. CSR shows consumers you care about your customers and the world. Companies that market green innovation initiatives enjoy positive media coverage, further strengthening their business reputation.
• CSR can attract investors. CSR can attract investors because potential stakeholders use a company’s social responsibility as part of the criteria for deciding whether or not to invest. According to Morgan Stanley, 77 percent of international investors consider a business’s positive social and environmental impact before committing to funding. CSR is also crucial for improving a company’s stock prices, which is essential for attracting investors.
• CSR can help your business attract and retain employees. A commitment to CSR can help you recruit and keep high-quality talent who want to work for an environmentally friendly company. In a survey from America’s Charities, 70 percent of respondents said working for an employer whose mission and values align with their own is imperative or very important. A comparable percentage emphasized the importance of being part of a company with a culture that actively supports giving. And it goes without saying that when you treat employees with respect and fairness and compensate them well, they will be more loyal to the company.
• CSR can help you streamline operations and reduce costs. Companies that focus on reducing waste save money. For example, moving from printing reports to digital reports helps companies save on paper and ink costs while reducing the trash they send to landfills. Upgrading to energy-efficient equipment and HVAC systems can save the company on utility bill costs, and using lighter-weight packaging saves money on shipping costs.
• CSR encourages innovation. Generating consumer goodwill and reducing emissions takes creativity and innovation. Companies implementing CSR practices may invest more in R&D or solicit customer feedback for eco-friendly ideas about new products, raw materials, services and processes. Additionally, when you invest in employee training and professional development, your team is more likely to devise innovative solutions to business problems.

What are some examples of corporate social responsibility?

CSR goes beyond making a charitable donation and calling it a day; it requires a daily commitment. The following three companies have made CSR a core part of their identity.

Ben & Jerry’s

Ben & Jerry’s, celebrated for its ice cream, has made corporate responsibility the center of its overall business strategy. The company uses only fair-trade, GMO-free ingredients and was among the first to offer employees in same-sex partnerships equal domestic benefits. It has increased its focus on sustainability with a carbon reduction program and a “Climate Justice” campaign highlighting how climate change unfairly affects marginalized communities.

Ben & Jerry’s also developed a dairy farm sustainability program in its home state of Vermont and a hiring program specifically to employ ex-convicts in its bakery. These initiatives show Ben & Jerry’s dedication to social justice, environmental sustainability, and creating job opportunities for underserved communities, all as part of its larger CSR strategy.

Dr. Bronner’s

The soap and personal care products company might be noted for its elaborate labeling, but it is equally known for its commitment to building a better planet. Dr. Bronner’s obtained its B Corporation certification in 2015 and has consistently ranked among the top B Corporations globally for its environmental and social performance.

Lego

The bricks many of us played with as children come from one of the leading companies investing in sustainability. In September 2020, the company pledged more than $400 million to make all packaging sustainable by 2025, an initiative that is currently underway. These funds are also being invested in renewable energy projects and innovative materials to help Lego achieve carbon neutrality. Additionally, the company is educating children on environmental issues with “learning through play” initiatives and other strategies to reduce its environmental footprint. As for the toys themselves, Lego has pledged to convert to fully sustainable production practices by 2032, including using recycled and bio-based materials for its products.

How can small businesses practice CSR?

Small business owners may wonder about the costs of becoming more socially responsible and how shifting toward sustainability will affect their bottom line. Is it possible for a small business to be socially responsible while maintaining a healthy profit margin?

The short answer is yes. You can contribute without suffering economically. In fact, CSR initiatives can even save you money. For example, after General Mills installed energy monitoring systems to reduce energy usage, it saved $600,000.

Here are some tips for businesses adopting or strengthening their CSR practices: 

• Think sustainably when innovating. Small business owners should view innovation through the lens of sustainability. When creating new products, services or company initiatives, consider sustainability and how to appeal to socially conscious consumers.
• Share your sustainability efforts with customers. If you’re making CSR headway, communicate your efforts to customers. For example, socially conscious consumers often check a product’s packaging before purchasing. According to McKinsey and Nielsen, sales of consumer packaged goods with ESG-related claims grew 28 percent over five years compared to 20 percent for similar products without ESG-related claims. So be sure to share your eco-conscious efforts with your customers.
• Have multiple CSR goals. While you may want to start with one CSR initiative, considering multiple socially responsible goals can be more helpful. The McKinsey/Nielsen report showed that products with multiple CSR claims have double the growth rate of those with only one claim. Customers tend to reward companies showing social responsibility is an important part of their culture by pursuing multiple areas of improvement.
• Think about the long term. Small businesses need not be overwhelmed by CSR and deferred financial returns. Begin thinking about the long term. If you demonstrate you care, consumers will shop with you repeatedly. CSR may not always deliver immediate financial returns but can foster long-term customer loyalty and sustainable growth.
• Lead with transparency. Choundhry emphasized the importance of being transparent when sharing your CSR efforts with employees and the public. “Don’t make exaggerated sustainability claims without tangible actions to back them up,” Choundhry cautioned. “If you claim your product is eco-friendly, ensure every aspect of its production and packaging supports that claim.” Being honest about your CSR challenges is also crucial. “Consumers value transparency and are more forgiving of companies that acknowledge their shortcomings while striving for improvement,” Choundhry added.
• Incorporate CSR into all aspects of operations. Amir Kahani, a business ethics expert at KeyIdeas, noted that abiding by ethical business practices is crucial to CSR success. “The solution lies in establishing ‘ethical businesses’ that incorporate responsibility into every aspect of [a business’] operations, not as a separate project but as their primary objective,” Kahani advised. “It would be best if you implemented a strategy that is a ‘win-win-win’ technique: win for the seller, win for the buyer, and win for society’s well-being.”