Does it pay to be really good if you're an SME?
In the pursuit of profit, you need to go all in when it comes to Corporate Social Responsibility (CSR) - and for the right reasons. Otherwise, research shows that it’s not even worth trying.
The U-shape Relationship Between Sustainability and Profitability
Michael Barnett of Rutgers University and Robert Salomon of New York University carried out research on 1,214 companies to determine how social performance impacts financial performance.
Net income and return of assets (ROA) was used to measure financial performance. Whereas social performance was determined through the use of Kinder, Lydenberg and Domini data, which evaluates companies according to thirteen sustainability criteria.
The most unattractive position was in the middle: firms with only moderate levels of social performance had the lowest financial performance. And the greatest profitability accrued to the companies with the highest commitment to CSR.
Is CSR Applicable To SMEs?
A common business misconception is that SMEs can't invest in CSR effectively because they don't have the resources (they can’t simply plant 5 extra trees for every toilet roll they manufacture).
In fact, SMEs are more able to engage with sustainability on a daily basis through a closer connection to their business goals and a natural interaction with the local community.
And, with SMEs turning over £1.9 trillion and responsible for 60% of UK private sector employment in 2017, their role in promoting positive environmental and social change is significant.
Team Driven CSR Is The Differentiator
Too often ethical business decisions are driven by consumer pressure. This has led to mediocre CSR strategies that fail to set companies apart.
Instead, focus on the values and strengths of your business when strategizing your CSR. What can you do to have an impact that other businesses can’t?
Lean in to your team's passions and your company culture to inspire strategies that align with your wider vision and always measure the impact.
At Geeks, we are known for our training initiatives that were born out of a passion to empower and encourage people, especially women, into tech. The goal: to create outreach programmes that can be scaled nationwide. This not only has a measurable impact on the community, but is simply good for business and that bottom line we’re all so fond of!
We’ve also set up a charity club that works closely with our local community to identify areas where we can make the biggest impact. Our GreenGeeks club focuses on environmental sustainability, starting with our team who are encouraged and rewarded for cycling to work.
Successful CSR doesn’t have to be complicated but it should have a clear vision that is shared with the business and be organically driven by your team at all levels.
Dare To Go All In
- Don’t dabble in CSR
- The payoffs to companies who implement sustainability into their broader vision are significantly greater than those who create ethical activities every so often.
- Measure results
- Along the way, you should measure results and achievements from your sustainable initiatives. Being able to reflect and adapt will strengthen your position and organic connection to your community.
- CSR is a journey from compassion to commitment
- Pick sustainable initiatives that reflect your business culture and passions. The key challenge to business leaders of SMEs is committing to a strategy in the long run. But the payoffs to companies who do are far greater than the cost savings of those who choose to forgo it.