OPPORTUNITIES

Does Corporate Social Responsibility (CSR) affect the bottom line?

Some activists have argued that adopting CSR standards allows companies to build brand value by imbuing their brands with ideas, emotions and beliefs that appeal to consumers. And, they have argued, the cost of building brand value with social responsibility initiatives is usually cheaper than trying to achieve the same effect through advertising and public relations.

But many corporate executives disagree. Ben Stimson, group head of a British broadcasting service, told Brand Strategy in 2002, "I don't see any evidence in the short term that successful community programs increase sales. . . CSR is not so important for the immediate bottom-line impact as the longer-term positive effects on reputation."

The Cato Institute's William A. Niskanen goes even further, "I would not personally invest in any business that sacrifices the interests of its shareholders for some other objective [because] any dilution of the objectives of a business is likely to lead to behavior that does not serve any group very well." Seemingly in accord with Niskanen's position is the finding of one study that the stocks of companies that scored well on social and environmental issues did not always perform as well as well as others in the same industry.

But other studies have suggested that consumers do respond to CSR indices. In 2002, The Financial Times cited surveys showing that 75 to 80 per cent of British consumers were inclined to reward companies for being "good corporate citizens," and 20 per cent were likely to punish the "bad-doers."

(Source: Corporate Social Responsibility and Globalization: A Reassessment by Randall Frost)