Corporate social responsibility: Why it pays
Entrepreneurs like you on why being truly socially responsible is key to their businesses' success
With the environment high, it seems, on everyone’s agenda, businesses feel compelled to show they are doing ‘their bit’. But corporate social responsibility (CSR) is far more than greenwash. It represents an investment in staff, society and the world as a whole.
It can also boost your bottom line and should be seen as an investment not just a cost. What’s more, it shows that capitalism, so often blamed for many ills, can be a genuine force for good. Effective CSR isn’t a bolt on or an isolated scheme for getting good PR, but a holistic approach that merges your business’ primary aims with other more worthy objectives.
Nigel Cooper took over marketing services agency P&MM as part of a management buy-out (MBO) team in 2001 and credits his company’s CSR policies for much of its growth since then. The company is now a £90m turnover group, and last year made profit of over £3.2m, compared to just £150,000 at the time of the MBO.
P&MM merges staff improvement and achievement with environmental policy, local charity and personal benefits. The company treats staff well, offering perks including additional holidays on birthdays and childcare vouchers, with the belief that if you do so they will repay that investment with enhanced productivity.
The company has a high level of staff retention; the average length of service is close to five years and one third have been at the company for 10. Cooper says this cuts recruitment costs and retains P&MM’s knowledge base, both of which affect the bottom line.
“There are various benefits. If you show a good level of CSR in your business, then nine out or 10 times you’ll get back far more from your employees than you put in,” he says.
Benefits for all
Andrew Beale is the managing director of the family-owned business Beales Hotels, which currently turns over £6m. Although founded in 1769, the ostensibly modern idea of CSR – or sustainability as Beale tends to call it – is key to the company’s success. Its staff retention can be measured in decades and, like the family-owners’ involvement, crosses generations. Such commitment is priceless in an industry dependent on good service. Like P&MM, Beales combines environmental concern with staff benefits. For instance, staff are rewarded with benefits, such as free stays at the hotel if they reduce their own emissions by walking, cycling, car sharing or using public transport to get to work. The company has been an Investor in People (IiP) since 1997 and was the first hotel group to achieve the standard.
The IiP standard is worth considering for any growing business that wants to improve its management framework and tie in career development with business aims, as it offers a strong appraisal method and helps businesses to create durable structures for growth. Beale says that a dedicated commitment to staff improves service, which ensures that customers come back, and this of course increases profit. “It improves sales, so there’s a virtuous circle that’s sustainable and profitable,” he says.
There’s so much greenwash in business that there’s a danger genuinely eco-friendly companies could get lumped in with the bad ones. The recent fiasco at Starbucks, which has long prided itself on being a responsible firm, clearly demonstrates this point. A report in The Sun newspaper showed that the business wasted enormous amounts of water by leaving a tap constantly running in all of its 10,000 stores. Within hours the internet was flooded with condemnation of the company and boycott groups sprang up. So if you are going to promote yourself as a green company, ensure you’re thorough and don’t just do it for PR, as journalists like nothing more than a story about hypocrisy.
There are many ways to improve your impact and the Carbon Trust is on hand to help. Beales took an interest-free loan for half the cost of a modern and efficient £160,000 boiler system, which saves the environment 214 tonnes of CO2 and the hotel £23,000 a year in energy costs. The company has also been recycling for years, encourages efficient water use from guests and, as mentioned, encourages greener travelling to work. Such aims are achievable for most companies, but crucially can also benefit the bottom line.
P&MM encourages its staff to be greener by taking advantage of a government scheme that allows it to claim back the VAT of a new bicycle and cycle equipment and set it against national insurance contributions (see box-out).
Companies that are really serious about CSR must also consider their local area. There is now a big movement towards buying locally. Again, this can be seen as another buzz phrase, but it’s often sensible in terms of reduced costs, easier communications and tends to fit more comfortably with environmental concerns. Beales is proud of its strong relationships with local suppliers, which provide much of its restaurant menu. P&MM gives money to local charities on behalf of staff that have hit targets, creating a feel-good factor among employees.
Sharath Jeevan is the chief executive of Global Giving, a charity organisation that is focused on getting contributions from businesses. He believes that entrepreneurs want more involvement with charity than simply giving money. Global Giving addresses this need by allowing companies to adopt a project, and publishing information about how money has been spent on its website. “Entrepreneurs want to create sustainable businesses and charitable projects,” says Jeevan. “People want to give something back, and use their business skills to make a difference.”
Ready to go?
You don’t have to spend huge sums of money to get your project underway and it can grow as your business does. It is also something that doesn’t need to take up a huge amount of your time and might work better if handled by a small committee with a designated budget.
Combining the feel-good factor with genuine social concerns and enhanced productivity is the type of win-win situation you should be looking for. But, ultimately, if it is to become an intrinsic part of your business, then your staff need to imbibe its ethos – and then the rewards will become incalculable.
Was this the first CSR strategy?
In the early 20th century, John Spedan Lewis realised that his father’s ruthless pursuit of profit was damaging productivity. His staff were demoralised, poor and struggling to cope with the rigours of their own lives. As a result, providing good customer service was far from their minds and sales opportunities were being missed. Lewis, therefore, cut working hours and introduced new benefits, such as paid holiday and workers’ committees, invigorating the company with positivity. The effect was profound. The struggling store went from a loss of £8,000 to a profit of £20,000 in five years. Later staff would become partners, the company adopted a constitution and a profit share scheme was introduced. Today the John Lewis Partnership, which includes Waitrose, is still one of the UK’s most important high-street brands.
Investors in People (IiP)
Formed in 1993 to create a standard for the development of staff designed to improve business. www.investorsinpeople.co.uk
The emissions-cutting company now has a £31m pot that can be lent to businesses to invest in energy saving equipment. www.carbontrust.co.uk
Geared for Giving
Charity aiming to get businesses making charitable donations, and has 500 schemes in over 30 countries. www.gearedforgiving.com
Available for all employees that are on PAYE and employers that can claim back VAT. www.cyclescheme.co.uk