Corporate social responsibility, CSR, includes noble causes like environmental sustainability, reducing wasted resources, doing charity, and more. While these gallant endeavors are honorable and virtuous, their payoffs include improvements not only in the environments in which businesses operate, but also in brand reputation and profits.
Large businesses like Walmart, Unilever, McDonald’s, and P&G all claim that their responsible use of resources and energy helps fuel growth and innovation. These initiatives have gone beyond just good corporate citizenship and are now good business models to increase bottom lines.
A Misconception About Corporate Social Responsibility
There is a notion that companies that focus on corporate social responsibility programs are focusing less on their core business (and the profits from it), but this could not be further from the truth. Some media outlets expand the fallacy by publishing pieces like this Guardian article, “Let’s be honest: real sustainability may not make business sense.” Fortunately, however, both business CSR programs and business profits are well documented and correct conclusions can easily be drawn.
In fact, dozens of reports published by Goldman Sachs, Deloitte, Harvard Business Review, and others, prove the business case for sustainability. They say that “the companies that are the leaders in sustainable, social and good governance policies have 25 percent higher stock value than their less sustainable competitors.”
3 Ways Sustainability Programs Increase Profits
One of the greatest initiatives in the corporate social responsibility realm is sustainability. Companies of all sizes, across all industries, and throughout the world are realizing the positive long- and short-term effects that sustainability has on their profits.
1. Reducing Costs
The most obvious effect sustainability has on profits is reducing costs. For example, when energy consumption is optimized, companies spend less on utility bills. In food-service chains, for example, the Edison Electric Institute tells us that the cost of energy accounts for anywhere from 3 to 8 percent of a food-service chain’s total operating expense. In restaurants, studies show that a 10 percent reduction in energy costs can boost net profit margins by as much as 4 percent.
The most obvious effect sustainability has on profits is reducing costs. For example, when energy consumption is optimized, companies spend less on utility bills. In food-service chains, for example, the Edison Electric Institute tells us that the cost of energy accounts for anywhere from 3 to 8 percent of a food-service chain’s total operating expense. In restaurants, studies show that a 10 percent reduction in energy costs can boost net profit margins by as much as 4 percent.
Of course, optimizing energy is not simply cutting consumption. Energy consumption is the lifeblood of business. And a given restaurant cannot simply turn off the air conditioning or refrigeration randomly to cut costs. However, by eliminating waste like unnecessary off-hours consumption and optimizing usage based on data collected by submetering, energy management systems enable companies to save money on power bills and thereby increase profits.
2. Increasing Operational Efficiencies
Beyond cutting the power bill, sustainability programs improve system performance and increase operational efficiencies. For example, industrial manufacturers can use granular visibility to optimize performance of their systems. By understanding the consumption patterns of individual devices, companies can identify those machines that are malfunctioning and causing bottlenecks in production lines.
Beyond cutting the power bill, sustainability programs improve system performance and increase operational efficiencies. For example, industrial manufacturers can use granular visibility to optimize performance of their systems. By understanding the consumption patterns of individual devices, companies can identify those machines that are malfunctioning and causing bottlenecks in production lines.
Furthermore, companies can plan predictive maintenance based on energy consumption data. This kind of maintenance cuts the maintenance costs of systems that do not require it and cuts the repair costs when the necessary systems are maintained as needed.
3. Advance Brand Reputation and Customer Loyalty
Sustainability programs are great for corporate image. By branding a company as one that is not only concerned about the environment, but also taking positive action to save resources, businesses are expanding their customer base by advocating their programs to customers who are more loyal, less sensitive to price wars, and purchase more.
Sustainability programs are great for corporate image. By branding a company as one that is not only concerned about the environment, but also taking positive action to save resources, businesses are expanding their customer base by advocating their programs to customers who are more loyal, less sensitive to price wars, and purchase more.
Profits, Growth, and Innovation
If ever there was a trifecta of business goals, this would be it: profits, growth, and innovation. Not coincidentally, these are three of the benefits that many companies are reaping with corporate social responsibility programs. While CSR is certainly not the only way to increase profits, achieve growth, and foster innovation, it by no means is a hindrance. The misconception that CSR inhibits profits, growth, and innovation must be laid to rest. Study after study, and many corporate success stories simply prove the opposite to be true: corporate social responsibility initiatives build brand reputation, profits, growth, and innovation.
Original Article by Jon Rabinowitz
