CSR is PR (and can make you a lot of money!)

Corporate Social Responsibility is Public Relations. Is that a bad thing? No, it is simply a byproduct of implementing CSR initiatives.

In this day and age, all companies should participate in some form of CSR. Consumers have become normalized to socially conscious brands. This normalization means that it is pertinent for brands today to give back as to meet expectations of consumers.

Corporate Social Responsibility is the belief, and consequent actions, that companies should be conscious of their consumers and environments in order to conduct ethical, sustainable, and forward-thinking business practices.

The point of companies, especially publicly traded companies, is to provide increasing value back to its shareholders. Typically this is in the form of growing the stock price and providing competitive pay / benefits to its employees.

The traditional definition of a shareholder has morphed over the years when considering Corporate Social Responsibility. Instead of just being related to stockholders and employees of the company, shareholders are now considered to be all individuals, organizations, and physical resources impacted by the ongoing operations of a business.

Why does CSR matter?

A business uses resources in order to conduct business. Those resources are consumed, processed, and delivered in the form of a product or service in exchange for money. That money pays for the operations of the business, its employees, its investments, and finally its return to shareholders.

As businesses consume resources, a number of other people, organizations, and the environment are affected along the way. Think about a furniture manufacturer. They have a number of decisions to make for their business including sourcing material, disposal of their waste, which utilities to use to power their business, which channels and sources to select to sell their furniture, and many more choices.

Let’s say the furniture business has a choice to source wood produced in Country A with good labor laws or in Country Z where labor laws are not enforced with incredibly dangerous work environments. Heck, they might even use child labor. Let’s assume the quality of the wood is the same, however the wood from Country A is 20% more expensive than the wood from Country Z.

Saving 20% on wood for a furniture manufacturer, obviously a widely used input to make furniture, could really help provide value back to shareholders. Then so much money can be saved, invested, and distributed to shareholders!

Well, selecting the company in Country Z saves 20% on wood but makes the furniture company complicit in supporting inhumane labor practices and possibly even child labor.

This furniture manufacturer example proves the point the Corporate Social Responsibility matters regarding the ethics of business dealings. But now the company traded off supporting good business practices for morals. How does the company overcome that 20% deficit?

Companies Use CSR to Gain Market Share

The furniture company made an important decision to help protect workers worldwide by paying 20% more for the same input. Do you really think the company is going to take a loss on that 20%?

Companies have to provide value to shareholders. Opting to help workers worldwide by paying 20% more for an input from a company that supports good labor laws provides the company an opportunity to make public statement about their brand.

“We pay more for wood to support good labor practices. Our mission is to provide a quality product that helps workers worldwide.”

That statement, which discusses the tradeoff the business made, is Public Relations. The company’s CSR initiative is discussed in the company’s PR as a way to build brand recognition, show their commitment to good labor practices, and subtly explain why their product may be more expensive than their competitors.

Now as a consumer, you have a choice to make about which furniture to buy. Do you buy from a company that you know supports good labor practices or do you buy from a company that you know nothing about their labor practices? Assuming you can afford both products and you like the design of both products, you are more likely to buy from the company that supports good labor practices. Since they support good labor practices, you support good labor practices by purchasing their product.

Without the PR behind the CSR, the consumer may not have purchased the CSR product. Why should I spend 20% more on this chair? They look and feel the same. The brand doesn’t mean anything to me. But if the consumer was aware that the more expensive product supports good labor practices, they are more likely to purchase it.

Not only is a consumer now more likely to purchase the more expensive product that sources wood from Country A with good labor practices, they are also more likely to post about this on social media. People like being rewarded by their peers for making ethical decisions. Similarly they like sharing this news to influence others to support similar causes.

PR is essential to supporting CSR. Without consumers being aware of CSR decisions that a company makes, why would they be any more inclined to support their product? With an effective PR campaign, companies can now build brand awareness and create a loyal customer base that will not only buy their product but will also tell their friends about it. Some of the best new customers come from referrals, FYI!

The Internet Fully Enabled CSR

Without the internet, specifically social media, CSR would not be nearly as adopted by companies.

Companies need to make costly tradeoffs in order to implement CSR. In almost all cases, CSR comes as a cost to the company, which is a cost to the shareholder. Publicly traded companies have to provide financial due-diligence behind major initiatives in order to gain approval to undergo the CSR initiative.

Why would a company choose to implement a CSR initiative if it costs more money and reduces shareholder value?

Companies take on the expense of CSR and even the expense of a PR campaign in order to differentiate their brand, inform consumers about their CSR, and effectively grow their base of loyal customers. CSR is a means to increase their bottom-line. This may sound immoral, but it really is a win-win for the shareholders of the company and the outside shareholders affected by the company’s decisions.

So if CSR increases a company’s bottom-line, why is CSR a relatively new trend? Because the internet.

Without the internet, social media would not exist and CSR would not be nearly as adopted. Before the internet, companies would spend tremendous amounts on PR and receive fractions of the publicity that companies receive today from posting their PR on the internet. Social media allows influencers to gain positive reactions from their peers for supporting CSR. Brands receive the benefit of word-of-mouth, aka free publicity, once followers are influenced. And then if it becomes viral, jackpot!

Consumers could not be nearly as informed before the internet. Today, companies need to make good choices otherwise they will suffer the wrath of bad social media publicity that goes viral. Make choices against CSR, lose customers. Make good choices to support effective CSR, gain loyal customers.

Companies benefitting from CSR

There are two types of companies to consider, traditional firms and socially conscious brands. Established firms will implement CSR at different levels of their organization, specifically with the intent to differentiate their brand and gain loyal customers. Socially conscious brands have CSR in their DNA from day one.

Domino's is an example of a traditional firm implementing CSR and TOMS is an example of a socially conscious brand with CSR in its DNA.

Heard of TOMS? Buy a pair of their shoes and they donate a pair of their shoes to poor children in Latin America. Think about how powerful that makes their brand. Many shoe designers fail. Create a brand like TOMS and it’s hard not to get free PR. Now it’s hard for consumers to buy a different brand of shoes. It’s hard for consumers to not want to tell their friends about this specific pair of shoes they just bought.

Domino's existed well before the internet. They deliver pizza and other food. Over the years they have had advertisements about their store owners and how they’re rebranding to offer more food. Did anyone really care? Not really.

Now Domino's announced that they will fill in potholes that are in the delivery route from the Domino's store to the customer’s house. Think that’s going to cost them a pretty penny? You bet! Think customers will now think much more highly of Domino's? ABSOLUTELY.

Domino's implemented CSR in a way that makes sense for their brand, benefits the consumer, and helps out a lot of people that otherwise would not (and maybe never will) have bought pizza from Domino's. Did they keep this information disclosed? No way. They announced it. And what happened? It went viral.

The effect of Domino’s CSR? Yeah. Look at that stock price.

CSR is PR. There is no doubt about it. But CSR is also an effective mechanism to differentiate your brand, gain customer loyalty, and increase your bottom-line.