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How Corporate Social Responsibility Affects Reputation

Corporate social responsibility — or simply CSR — refers to the self-regulated accountability that a company has to its customers and clients, its stakeholders and shareholders, and the world at large. It calls into consideration the economic, social, and environmental impact of a company’s daily processes, from manufacturing and distributing to hiring and marketing. Promoting equitable treatment of those in marginalized communities and taking a stance against environmental harm are two of the most common ways companies can develop good CSR in the public’s eye.

Nowadays, with a generation of hyper plugged-in consumers and investors who expect some level of social responsibility from the brands they support — and are acutely aware of those that do nothing (or worse) — it is important for companies to practise and showcase authentic CSR, no matter the size or industry. In a survey conducted in 2019 by Aflac, 77 per cent of consumers were motivated to support companies dedicated to making the world a better place. The same study brought to light that 41 per cent of millennials put significant research into a company’s social responsibility initiatives before investing. Thus, it is imperative for all companies to have social responsibility policies, in order to stay competitive in the global market and maintain their reputations.

There is a plethora of benefits to upholding social responsibility. First, it is a boost to company morale. Employees like to work at companies they believe in, that are not toxic to themselves or others, and that positively impact the world around them. In 2020, Porter Novelli surveyed full-time employees during the pandemic and discovered that 93 per cent believed that companies should have a purpose beyond profits, and 95 per cent believed that companies should have a responsibility to customers, employees, suppliers, and communities beyond the shareholders. It goes without saying that happy workers lead to better productivity and higher quality work; motivated employees are also more engaged and loyal.

Another benefit of strong corporate social responsibility is longevity. The world is trending toward sustainability and social causes, and this trajectory is unlikely to reverse itself. Companies and even industries (for example, oil and fossil fuel) that do not align themselves with social responsibility will find themselves treading water against the tides of change and advancement. How long can they feasibly keep their head above water? A 2011 research paper titled “What Relation Exists between CSR and Longevity of Firms?” — written by Jean-Michel Sahut, Boulerne Sandrine, and Mehdi Mili — found evidence that adopting principles of CSR can help protect against bankruptcy and other crises. Those that do not adjust may find themselves eventually becoming irrelevant and unmarketable.

Many brands have garnered significant goodwill for their CSR efforts. The popular ice cream company Ben and Jerry’s has made known their stance on multiple issues — from fair trade practises to marriage equality. Sprinkled throughout their website and between social media posts about limited-edition flavoured pints, Ben and Jerry’s has included impactful and informative graphics on social justice topics and climate change. In 1985, founders Ben Cohen and Jerry Greenfield also started the Ben & Jerry’s Foundation, which provides grants to support marginalized, grassroots communities in the company’s home state of Vermont and throughout the rest of America. A longstanding commitment to giving back and using their voices to lift others has earned the brand considerable support from ethical ice cream lovers and sets the company apart from the rest of the frozen desserts market.

Lush Cosmetics is another example of a company that has built a sterling reputation through genuine corporate social responsibility. Having launched in 1995 with the intention to produce cosmetics with fresh, cruelty-free ingredients that would never undergo animal testing, Lush has since increased their stringent parameters to manufacture various organic, fair trade, vegetarian/vegan, and packaging-free products. Aside from ethically-produced goods, Lush is also known for philanthropy. One of their best sellers is the Charity Pot line of moisturizers. From its sale, 100 per cent of the proceeds are donated to grassroots campaigns and projects around the world. Remarkably, the UK-based company has never advertised their wares but has become globally successful through the word-of-mouth of their devoted customers and employees.

Conversely, many companies have been adversely impacted due to their lack of corporate social responsibility. Facebook, for example, has been mired in controversy for several years now. Founder Mark Zuckerberg has become one of the most detested people on the internet. Scandals involving privacy and data breaches, Russian bots, and the proliferation of “fake news” during the 2016 US election have alienated Facebook’s users and prompted a boom in the market for competitors (like iMessage and Signal) that promise greater levels of privacy and security in their services. Although the social media titan remains profitable through ad sales and maintaining multiple products (Instagram and WhatsApp, for example), its reputation is in tatters and will require a lot of time and energy to recover. The company will likely be scrutinized by the public and by law enforcers for years to come.

Similarly, German car manufacturer Volkswagen faced a major downfall in 2015 during their diesel engine emissions scandal. The United States Environmental Protection Agency (EPA) charged them with violating the Clean Air Act by masking their vehicles’ air pollution emissions to pass lab testing. The volume of emissions was, in fact, 40 times over the legal limit. When the information became public, Volkswagen stock dropped steadily; a year later, it was still 30 per cent down. Meanwhile, the company issued mass recalls, paid billions in fines, and faced countless lawsuits. The impact of Dieselgate went on to impact the rest of the industry as public trust in many other car manufacturers fell; yet the future of hybrid and electric cars looked rosy. Elon Musk, CEO of Tesla Motors, commented, “What Volkswagen is really showing is that we’ve reached the limit of what’s possible with diesel and petrol. The time has come to move to a new generation of technology.”

These examples make it clear that practising good corporate social responsibility can help build a brand or company to long-term success and avoid costly scandals. 

Rose Ho | Assistant Editor

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