Fortune 500 firms currently spend more than $15 billion per year on corporate social responsibility (CSR) activities – a number that researchers say is rapidly rising. Whereas companies generally used to have very small CSR divisions, these teams are growing and taking on more responsibility within their corporations. While the core tenet of increasing value for stockholders still holds true, companies have shifted to acknowledge that sometimes dedicating resources to CSR initiatives will have that intended effect. The opposite is also true – CSR is helping companies grow and be more successful – through improved recruitment, risk mitigation, better brand differentiation, and more.
Particularly in today’s digital climate, CSR is necessary. Companies used to be able to hide behaviors they were less proud of, but now employees and mere passers-by have the ability to act as whistleblowers and draw significant coverage via social media or other tactics. Uber is an extreme example of this issue, where a female engineer wrote a blog post that gained traction in ways it could not have without social media. Thanks to smartphones, even customers can share shocking sights – as United Airlines learned the hard way when they dragged a passenger off a flight, then gained national notoriety for it.
CSR is relevant to millennials both as employees and as customers. A study done through Stanford Graduate School of Business in 2006 found that over 90% of MBA graduates were willing to forgo financial benefits in order to work for a more ethical organization with a reputation for good corporate social responsibility. As the demand for CSR has grown exponentially in the past eleven years, it’s realistic to imagine that almost all graduates would fall into that category by now. In addition, according to Cone Communications, 76% of millennials consider CSR when choosing where to work. The best companies, that want to have the choice of the best possible employees, would be smart to offer things like volunteering, corporate matching, and a values-based culture that feels authentic to potential employees.
As customers, millennials represent about $2.45 trillion of spending power, so they’re clearly a market worth targeting. According to another study from Cone Communications, millennials are the most likely group to seek out responsible products (85% vs. average of 79%) and are most likely to hold companies accountable for producing and communicating results of CSR efforts. We’re an inherently skeptical generation, accustomed to the accessibility and volume of information, and we translate that to the companies we buy from. If your company isn’t seen as trustworthy, you’ll have a much harder time convincing millennials to choose to purchase your products.
In addition, according to the first report from Cone Communications, 93% of Millennials say they have a more positive image of a company when it supports a social or environmental issue. As such, to some extent corporate social responsibility helps insulate a company’s reputation. CVS/pharmacy made the difficult decision to stop selling cigarettes, and was able to demonstrate measurable results that cigarette sales overall decreased, and had a stronger brand by doing so. If companies like CVS put energy into building up an authentic brand based on meaningful CSR initiatives, they’ll be more likely to weather bad PR if they ever find themselves in a bad situation.
While this creates a much more challenging environment from one perspective, it also opens a wide range of opportunities. As we learned during Julia’s presentation on Aerie last week, companies benefit when they can successfully leverage their customers. By encouraging its customers to share images on social media with the hashtag #AerieREAL, Aerie was able to get a lot of free, good PR. Though this could always backfire, an authentic company engaging with its customers authentically is best positioned to be successful through endeavors like this one.
The smartest companies, when approaching CSR initiatives, recognize the value of social media and digital business. These are the realities of today’s business environment, so leveraging them instead of working in spite of them will show companies greater success in the long run. 72% of executives have used social media for their CSR work, and 59% believed it had a positive impact on their interactions with customers, according to Weber Shandwick. With social media as a relatively inexpensive research with a seemingly limitless reach for a strong brand or initiative, companies will be smart to follow the lead of American Eagle and Aerie.
I’ll be discussing corporate social responsibility through a case study of Dell Technologies in my presentation on Wednesday, so thought some context on corporate social responsibility and particularly our generation’s interactions with CSR could be interesting. I hope you all enjoyed it.