Corporate social responsibility (CSR) is not a new idea – in fact, it’s been around for well over a century. CSR is the idea that businesses have an obligation to give back to society, to go beyond their profit-seeking goals and engage in philanthropic work. Over the last year, I conducted a study exploring how companies decide which philanthropic initiatives to pursue.
Although CSR work is theoretically supposed to be completely separate from revenue goals, oftentimes corporate philanthropy is meant to engender a favorable response from consumers. Millennials are aging into their prime spending years, and as more and more millennials reach their 30s, they will be an increasingly important consumer group. Although millennials only comprise about 30% of the population, they are set to dominate purchasing power in coming years – in fact, by 2020, millennials will have a collective spending power of roughly $1.4 trillion.
Millennials care deeply about social issues and expect that the companies they give their business to are commited to giving back. Research has shown employees will take a pay cut to work at a purposeful company, and companies that engage in CSR have better employee retention rates. Businesses have responded in kind, baking philanthropic endeavors into their corporate identity.
Today’s consumers are more discerning, and brands’ motivations are under severe ethical scrutiny. In oversaturated markets, CSR is one way for companies to emerge from a homogeneous pool of brands.
The study relied on in-depth interviews with executives from Fortune 500 companies who were directly responsible for corporate citizenship decisions. The responses showed a shift in thinking about the subject – in earlier years, companies threw money at causes arbitrarily. There was no strategy; they were simply donating time, money and resources to charitable causes. Today, consumers are especially sensitive to ethical concerns in the business world. Companies have taken note of the desire of consumers — particularly millennials — for meaningful action and have realigned their CSR work to reflect that.
Authentic alignment between the brand’s product and its charitable work is at the forefront of the decisions these executives are making. Interviews with General Motors revealed the company’s deliberate decision to invest in sustainable rubber harvesting. In an industry that relies on rubber for tire production, it made sense for GM to donate time and money to making that practice environmentally friendly.
However, these high-level decisions are not made in a vacuum. Executives are aware that the considerable expense of CSR needs to be justified one way or another. Several interviewees mentioned reciprocity. If the business was going to invest in a cause with either money, employee time or both, they wanted a return on that investment. Historically, the causes companies engaged with brought them reputational benefits, if not increased patronage (and consequently increased revenue). The pro bono work that consulting firm Oliver Wyman does often exposes the company to nonprofit board members who work for other companies that are prospective Oliver Wyman clients.
According to the study, managers used two other tools – inspiration and research – to choose CSR initiatives. Because corporate philanthropy has such an extensive history, the field is rife with examples to learn from, which is what nine out of the 10 companies studied did. In one instance, Viacom took a page out of Microsoft’s book and modeled its program after one the tech giant had pioneered. After pulling inspiration from other companies, managers researched the minutiae of what the program would require, what it would produce and – most importantly – what it would cost. After the feasibility was established, the program often launched, sometimes in a trial capacity. Once a program was in place, almost all interviewees described an evaluation process to assess whether the program would be effective enough to merit the company’s investment.
- Corporate social responsibility is becoming a more developed, more deliberate field.
- CSR can influence consumer sentiment toward a brand or product.
- Modern consumers expect all major companies to be engaged in some form of CSR.