The business case for CSR: the financial impact of social commitments & initiatives.
February 7, 2011 3 Comments
This weekend, as reported by JustMeans, US President Obama’s sent a clear message to the Private Sector: CSR Is Your Obligation (and It’s Good for the Economy, Too), prompting Stephen M. Bainbridge, a Law professor at UCLA, to produce yet another “piece of evidence” in the case against CSR. According to the Author, President Obama, who preaches the “false religion of Corporate Social Responsibility“, is “wrong” because the “obligation of business is to sustainably maximize long-term profits for shareholder”. Like many CSR opponents his claim is that a company engaging in CSR actions can only have two motives: being illegal or being insincere.
Interestingly, on the other side of the bench, I came across the results of a study led by Alan Fustec, professor at the School of Economic and Social Development (ESDES) in Lyon, France, measuring the financial impact of the French Railways Company SNCF’s CSR social commitments and initiatives, more specifically the initiatives targeting the local community and the general public in the community.
“While these programs are often considered as a cost only, the study shows a net gain for the company and the community,” says Professor Fustec. “5 million euro for the company, and 6.4 million for the community,” adds Vincent Bouznad, from the Department for Sustainable Development at SNCF.
Five major initiatives, conducted in the past two years, have been studied: the use of social enterprises for maintenance works and services, the presence of social mediators in trains, school presentations to teach young people the consequences of their acts (pull the alarm unnecessarily, vandalism …), the fight against exclusion of homeless people and the responsible purchasing of goods and services.
“For each action, we measured the cost (grants to associations, wages, working hours that are spent by employees of the company …), the gain for SNCF (cost-benefit analysis, reduced vandalism, impact on train delays …) and the gain for the community (lower unemployment or subsidies, impact of train delays on passengers, savings in terms of days in prison, greater security. ..), “said Alan Fustec.
A big surprise came from those results: they clearly demonstrated that the initiatives had a positive financial impact both on the company and the society. Besides strengthening SNCF’s public service mission and role in promoting social cohesion, the study, according to Vincent Bouznad also had a positive impact on the operations of the company itself: it contributed to raise managers’ awareness and encouraged them to identify new ways of doing business, therefore creating a “virtuous circle”.
Professor Bainbridge, just like many anti-CSR advocates, tend to forget that there are companies out there that are being sincere in their commitments towards the local communities in which they operate. If a company like SNCF, independently of its legal status and country can achieve positive financial outcomes through its social initiatives why wouldn’t it be the case for US companies? And who says that those actions don’t contribute to “sustainably maximize long-term profits for shareholders” as well?