When speaking to business leaders, the problem with CSR is inherently one of communication. On one hand, a business must be able to communicate its social value to a consumer but equally important the value of engaging in socially-oriented activities must be communicated to executives. A lack of the former leads to poor return on investment and a lack of the latter leads to CEOs unwilling to sustain a commitment to a social initiative. Therefore, it is imperative that both scholars and practitioners understand how CSR can drive value generation.
A few days ago I attended an annual conference hosted by the St. Louis chapter of the American Marketing Association. Aside from learning why the state of my Linkedin account is acting like a boat-anchor for my career, I had an opportunity to talk to Gordon Fowler, the president and CEO of 3Fold Communications. Among 3Fold’s myriad of social practices is, as Fowler puts it, a “community tithe,” in which the company gives 10% of its 3 t’s (time, talent, and treasure) to the communities in which it operates. If you’re wondering how a company can remain competitive when it is already at a 10% disadvantage to the competition, Fowler says that he’s developed a competitive advantage from CSR based on three important points:
Community involvement exposes business opportunities
Like an artist who paints what they know, an entrepreneur sees opportunity in areas where they are familiar. Many people who’ve started successful businesses or developed innovative products would like to chalk their success up to intuition, but in reality it takes technical knowledge and experience with the market to understand where potential value lies. A good corporate citizen, one with strong ties to community stakeholder groups, has a level of understanding of their potential customers which would be hard to gain through marketing surveys or focus groups. In addition to 3Fold, Fowler is a serial entrepreneur who has started multiple businesses around Sacramento. He says that his charitable work through 3Fold allowed him to network with a wide variety of individuals and exposed numerous business opportunities. Eventually these connections lead to a variety of new ventures. Therefore, don’t underestimate the relationship building potential of community involvement
Customers respect your brand
Fowler says that 3Fold communication stayed committed to its business model even in the face of extreme financial pressure. During the recession in 2009, 3Fold was basically operating month-to-month in terms of its ability to pay its bills. Yet despite the stress, 3Fold still turned away contracts from clients whose businesses were not in line with 3Fold’s values, and still maintained its 10% community tithe. New and old clients, Fowler says, noticed and rewarded the firm with commitment and positive word of mouth. The 3Fold approach may be a tough sell in trying times but the research supports the result. In a 2011 review article published in the Journal of the Academy of Marketing Science, John Peloza and Jingzhi Shang note that time and again, CSR leads to better brand evaluations, better customer retention, and greater instances of product choice. However, a one-time donation to the local food bank is not going start generating consumer interest. It takes time and commitment to cultivate sincerity but customers will respond well when they believe a brand is exercising its values.
You build better employee relationships
Time and again it’s been shown that employees want work to be rewarding. Yes salary level still matters, but it’s not the cure-all for employee motivation and retention. Social involvement humanizes a company and gives it a purpose that many employees can find value in and connect with. In a survey done by LBG Associates, 71% of employees that participated in employer-sponsored volunteer programs reported more satisfaction with their companies. This is on top of recruitment benefits a strong CSR reputation provides. An article in the Journal of Business Ethics reported that mobile employees, the highly sought after knowledge workers crucial for a business, were more likely to apply to a company that prominently displayed its community involvement. At 3Fold, Fowler says the strong culture of citizenship molded employee attitudes as well, making them more willing to sacrifice for a company they felt was already beneficent. He stated that nearly every member of the company talked to him and volunteered to take a pay cut when they learned how lean the times were in 2009. That’s the kind of value driving commitment many companies covet but few can produce.