To what extent is corporate social responsibility(CSR) beneficial to company's performance?

Topics: Social responsibility, Customer relationship management, Corporate social responsibility Pages: 6 (1534 words) Published: October 17, 2014
To what extent is Corporate Social Responsibility (CSR) beneficial to a company’s performance? An investigation of the correlation between Corporate Social Responsibility and key company stakeholders – customers, employees and investors.

After years of investigation, the European Commission, which defined Corporate Social Responsibility as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission, 2001), has recently claimed that full integration of CSR into business strategies would grant enterprises long-term success (European Commission, 2011). CSR and quantitative corporate financial performance (CFP) correlations have generally been found to be positive to insignificant (Reinhardt & Stavins, 2010). Yet, correlations between CSR and qualitative factors for company success still remained uncertain. Based on the above definition, this essay will study the interaction between CSR and some key company stakeholders. It attempts to investigate the linkage between CSR and qualitative factors such as customer perceptions, employee commitment and investor confidence.

Customer perception is an integral part of company success. Study showed that customers’ willingness to buy are dominantly based on their perceptions of the company (Smith, 2013). Hence, customer relationship management (CRM), which has direct impact on their perceptions, plays a crucial role in company performance. Lacey and Kennett-Hensel (2010) demonstrated a strong connection between CSR performance and CRM, stating that customer relationships could be strengthened by the adoption of CSR measures. By taking into consideration interactions with customers, such as customer experience and after-sale services, CSR activities could help promote customer satisfaction and reduce conflicts with customers. According to Kumar (2012), companies with better CRM are more effective in acquiring, retaining and reacquiring customers. This better management of customer relationships could in return enhance customer perceptions of the companies. Consequentially, the improving perceptions facilitate customer acquisition, retention and reacquisition, which contribute to better company performance. Another apparent aspect of CSR’s impact on customer perceptions is brand differentiation. A positive reputation grants companies higher level of customer confidence. Customers generally have higher willingness to pay a premium price for a reputable enterprise (Homburg, Koschate & Hoyer, 2005). For example, by protecting farmers’ interests and eliminating exploitation, companies selling fair trade coffee are allowed to charge premium prices without losing competitiveness. Such a brand differentiation attributes to the fact that a socially responsible and reputable image has been built through the adoption of CSR measures. With the discriminating ability, companies gain certain power to set their own price and could therefore earn abnormal profits.

Employee commitment is also decisive for company success. Employee’s welfare are taken into account in CSR activities in the forms of desirable working environment, standardized working hours and work satisfaction, for example. These explicit and implicit benefits boost staff morale and promote employee perceptions. Stawiski, Deal and Gentry (2010) revealed that employees’ organizational commitment is directly linked to their perceptions of the organizations they work for. A higher level of commitment would consequentially translate into higher productivity and workforce efficiency. For example, through the introduction of the Women’s Leadership Forum, Best Buy Corporation helped its female staff gain operational, managerial and innovative skills. These trained staff in return helped alter customer perceptions of the stores, which substantially increased sales to women customers without causing any...
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