Although socially responsible investing has been popular for decades, investors have shifted their focus significantly. Rather than simply steering clear of companies doing wrong by avoiding “sin stocks,” investors and consumers are actively seeking out companies that are proactive in “doing right”— seeking both a positive impact on society and favorable investment results.
In this season of philanthropy, your company’s initiative to actively align with environmental causes and provide programs for the social good is more relevant than ever. As investors and consumers put their money where their values are, companies that commit to doing good, are also doing well. Gaining profit and peace-of-mind is a pretty strong combo.
The most recent Nielsen Global Survey of Corporate Social Responsibility found that more than half of 30,000 people surveyed in 60 countries “are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.” In addition, two-thirds would prefer to work for such a company.
In the process, companies that participate in social corporate responsibility—and invest in other companies doing so also—gain a benefit that is closer to home: A big boost to their good reputations.
Your good name and the reputation of your brand is one of your most valuable assets as a business. Showing that you take your social responsibility seriously encourages positive public perception by projecting an attractive image to consumers and investors. This can positively affect your bottom line.
ReputationUs and DHM Research recently conducted an inaugural study on the importance of corporate reputation—good or bad—when buying a product or service, investing in a company and being employed by an organization. The scientific study, released in April 2019, found that “community relations” is one of the major factors that impacts a company’s reputation. In addition, 85 percent of responders said they feel positive about companies that are involved in their communities.
On a larger scale, the perception that healthy companies do good, not only for their communities but globally, is showcased in the Corporate Responsibility (CR) RepTrak, an annual study of companies with the best corporate responsibility reputations in the world. The Reputation Institute, a reputation measurement and management services firm has published the study since 2011. Of the world’s 100 most reputable companies for social responsibility in 2019, Lego, Natura and Microsoft rose to the top.
Linking Your Reputation to Social Responsibility
In addition to acting globally, investing in socially responsible ways is an excellent way to bolster your company’s reputation. Among other things, it increases customer loyalty, attracts shareholders and helps recruit and retain top-tier employees. These elements are key to achieving increased profitability and long-term financial success. Here are some considerations for these three audiences.
Embracing socially responsible policies goes a long way toward attracting and retaining customers, especially those whose buying decisions are influenced by local, national and global issues. Likewise, companies can gain increased foot traffic if they enhance the local community. For example, a credit union that puts money toward educational initiatives is apt to see an uptick in members as a direct result.
By being socially responsible, a company demonstrates that it incorporates ethical practices into how it does business. But community-oriented companies wrap their mission into their products and marketing. For example, TOMS sells shoes, but attracts environmentally-minded consumers with its clear intent: “We are business to improve lives;” telling customers to, “wear your impact.”
Over the years, responsible investing has proven itself to be a valuable link in many companies’ business strategies and portfolios. This creates a positive impact on society and helps sustain a company’s good reputation in the process. But it may also increase a company’s attractiveness as potential investors look into a company’s values as a critical criteria for deciding whether to invest their own money into the business.
ESG has become shorthand for investment methodologies that embrace “Environmental, Social and Governance” factors—or ESG. As a means of helping to identify companies with superior business models, there is growing evidence that suggests that ESG factors, when integrated into investment analysis and portfolio construction, may offer investors potential long-term performance advantages.
“Many positive trends suggest that an ESG reputation—not just ESG behavior—are of increasing importance to companies and funds,” said a prominent financial advisor who has to remain anonymous due to industry regulations on commenting about such investments. “Failing to develop and preserve an ESG reputation has the potential to create reputation risk. A company that does not take ESG initiative will likely find their reputations eventually take a hit.”
Socially responsible companies tend to attract employees who are eager to make a difference in the world—not simply collect a paycheck. With strength in numbers, collective employee efforts can achieve substantial results. This can increase workplace morale, and boost productivity. Recruiting and retaining top employees through socially responsible initiatives is one more way your company can enhance its good reputation.
No doubt about it, it is important for the public—especially your target audience—to have a solid perception of your company. Demonstrating that you are taking positive action is one effective way of generating positive press. More and better media coverage can be one of the best ways to bolster your company’s good reputation—especially as you provide high-quality products and services backed by solid customer care.
Now that you are involved, how do you leverage social responsibility to maximize the benefits to your reputation? We’ll provide a few tips soon in Part 2.