It would be disingenuous to deny that the CSR movement has not had a positive impact on the business community. However, the overwhelming amount of progress in socially responsible action has been sparked by the depletion of natural resources and the need for businesses to diversify operations, changes in society and societal expectations of business and government legislative response to corporate failings. Being socially responsible is now just good business, an essential component of operational and strategic decision making (Porter and Kramer, 2006). Whichever way it is has been achieved, there are consequences that still exist for organisation that do not conduct CSR.
Both the perception and reality of company performance can be enhanced by adopting CSR. Some pundits argue the payoff is long term, others argue that there is no payoff at all (McWilliams et al, 2006). Above profitability, there are a number of risks organisations face if they do not engage in CSR behaviour. It should be noted that the following is not an exhaustive list, merely the ones with the greatest potential impact.
Reputational damage has always been a key outcome of socially irresponsible business activities (Walker and Dyck, 2014). Reputation can be defined as the aggregate perception of an organisations internal and external stakeholders (Walker and Dyck, 2014) and represents a firm’s single greatest intangible asset. Once reputation is lost, or at least impacted significantly, it is difficult to get back. Changes to the speed with which reputation damaging information can spread is also of concern to socially irresponsible organisations as it is much more difficult to hide or deny wrong doing (Ashley and Crowther, 2012).Further to this, Walker and Dyck’s (2014) research showed a positive correlation between a firm’s reputation and those with corporate social responsibility.
Employee engagement and attracting talent appears to go hand in hand with socially responsible corporate practices (Bhattacharya et al., 2008). The global economy has been described as a ‘knowledge economy’ (Fitzgerald and Cormack, 2011), with the greatest corporate assets residing in the intellectual endeavor of staff. Bhattacharya et al. (2008) also argue that CSR is a way for a firm to show their values in practice and thereby emotionally engaging employees to achieve all of the organisation’s goals.
Engaged staff, at all levels of the business, are crucial to complete in a market place that is increasingly saturated by products and services. Differentiating the offering of one business from another (Servaes and Tamayo 2013) is becoming more difficult to achieve, but CSR related activities provide a point of product differentiation. Environmentally sounds goods (such as recyclable plastics) and Fairtrade food stuffs (such as coffee) are two examples of familiar products that have been differentiated by organisations acting in a more socially responsible manner. Firms who fail to innovate in this way will become followers instead of leaders, and potentially impact their profitability (Blowfield and Murray, 2008).
Smarter product and service development needs to start with managers and leaders thinking outside their traditional product and service offerings (Blowfield and Murray, 2008). The move to a more socially responsible business imperative has opened up new markets and opportunities within which an organisation can expand and prosper (Porter and Kramer, 2006). Those organisations closed to CSR will miss these opportunities and run the risk of being left behind. Even if opportunities are identified, access to capital may become increasingly difficult for non-CSR firms.
With the rise of Socially Responsible Investment, organisations that do not engage in CSR can limit their access to capital and hence, their growth potential (Porter and Kramer, 2006). Furthermore, organisations run the risk of greater regulatory intervention if they
