CSR: A PR 'fig leaf' or good business that pays off?

Cynics often view CSR campaigns as 'too-little-too-late' attempts to put make-up on a black eye and account for a company’s past mistakes. However, many CSR programmes are in fact genuine in nature and effective in helping companies’ top and bottom line. 

Let’s face it: For-profit companies are in the business of making money, and that’s their priority. Publicly-traded companies have a fiduciary responsibility - a legal obligation - to act in the best interest of their shareholders, who expect a return on their investment.

Subsequently many companies are reluctant to engage in CSR programmes and initiatives that can not easily be measured or connected to revenues, profits and ROI.

Not engaging in CSR activities under this premise is often a mistake as its has been proven that both short-term and long-term CSR campaigns can deliver business benefits to corporations in multiple ways. CSR initiatives can be effective in impacting a company’s image and perception in the eyes of the public, and ultimately positively impact the company’s financial position. 

For example, during the BP oil spill disaster last summer, Pepsi initiated a CSR campaign that committed to donating US$1.3 million toward ideas that benefited communities in areas affected by the spill.

Pepsi didn’t just blindly donate the money. They worked and engaged with the affected communities by crowd-sourcing ideas - surveying the communities and seeking their input to understand what programmes and initiatives would be most valuable to them. These efforts came across as genuine, and were praised by experts as a benchmark for CSR.

In addition, short-term CSR campaigns can also be effective on a 'crisis management' basis, impacting companies financially by reducing the bleeding of red ink. But experienced communications professionals know that in this age of BP oil spills and tainted milk scandals, short-term CSR programmes need to be accompanied by long-term, sustainable good corporate citizenship to be most effective.

A recent study by professional services firm KLD Associates of 30 publicly-traded restaurants found that CSR activities generate long-term growth in return on equity after an initial decrease, reflecting a U-shaped curve.

Furthermore, while some would argue that the lack of directly-quantifiable profit metrics can sometimes make CSR programmes a target of budget cuts when a company’s financial performance dwindles, good CSR is entrenched in everything the company undertakes - it is part of the company’s fabric and as such is difficult to eliminate entirely.

Considering CSR initiatives only from a cost-effectiveness, profitability, or return on investment point of view is not always the best approach. Companies should instead set goals based on key performance indicators that seek to address specific objectives, such as community impact and employee engagement. Meeting these objectives will not only benefit the community, they will also go a long way to achieving a real increase in top- and bottom-line results.