About 15 years ago, companies began publishing “Corporate Social Responsibility” reports—glossy, picture-filled overviews of their philanthropic efforts in local communities. From that relatively basic starting point, the efforts by companies to communicate the value they create has both greatly improved and evolved.
Today, companies are going far beyond CSR reporting and are integrating more business-focused metrics to demonstrate that they are a responsible actor in society but also operating in a manner that will ensure long-term success of their brand, reputation, and business model.
The Public Wants More Information
As the sophistication of reporting has increased, so have the public expectations around it. Consumers, policymakers, and institutional investors no longer are content to take at face value a “feel good” CSR/sustainability report about a company’s activities in its community.
They are looking for clear metrics, hard data, and measurable outcomes that demonstrate the connection between the positive impact companies are having on society with the ability of the company to sustain its operations in a responsible, profitable manner well into the future.
According to recent public opinion research conducted by Handshake, the public is actively seeking out information on companies’ engagement in communities and is making decisions based on that (1).
- 54% of Americans go to a company’s website or look at its social media channels to learn about its CSR/sustainability efforts
- 30% of Americans look for articles in national news outlets about a company’s CSR/sustainability efforts
- 70% of the American public will buy products from a company committed to investing in society
- 67% of Americans will recommend a company’s products to a friend or family member if it is committed to investing in society
- 82% of registered American voters said that if they learned that a company’s CSR/sustainability efforts had a positive impact on the communities in which it operates, they would support the company expanding into their community. And, over half of them (55%) said they would support local tax breaks as an additional incentive.
Handshake’s research further shows that the public wants to see data on impact and outcomes on corporate CSR/sustainability activities more than it wants to see information on time and money spent. Without demonstrating impact and outcomes, the brand and reputational returns on a CSR/sustainability strategy are very low.
In other words, the public’s expectations are high. “Feel good” stories of anecdotal work by a company are no longer enough to convince the public to buy the products of a company or advocate on behalf of the company to a friend or family member.
Market Expectations for Societal Investment
Beyond looking at consumer sentiment, Handshake has conducted a great deal of research that demonstrates a clear connection between the value of companies (financial capital), their investment in society (social capital), and their commitment to good governance and investing in their employees (human capital).
Specifically:
- Companies that engage with society have better financial performance
- For every 10% average increase in a company’s social capital, there is a 15% average increase in its financial capital
- Companies with a strong culture have better financial performance
- For every 10% average increase in a company’s cultural capital, there is a 17% average increase in its financial capital
- Companies that invest in these softer forms of capital have a competitive advantage that allows them to outperform the market
- An average increase of 10% in a company’s influence was related to an average 87% gain over average market performance for the following year
Moving the Needle from Awareness to Advocacy
If a company makes a sustained effort to use its business to improve communities, and is able to demonstrate meaningful results, the public will reward it. Hard data moves consumers from being aware of a company to advocating on its behalf. That advocacy, in turn, has clear business value. Enjoying an active form of public support not only improves the business through increased sales and a stronger market value but it also grants the company the all-important “license to operate” in communities so it can operate in a manner without undue public scrutiny and skepticism.