As a family-owned business where legacy and pride are top of mind, my company has always strived to be socially responsible. From sponsoring underprivileged children since 1999 and building schools in rural China to raising awareness for breast cancer, which has affected our people before, we take giving back to our communities seriously — as evident by our core values, which include “be[ing] kind” and “do[ing] what’s right.”
This makes the recent sight of social responsibility gaining traction in the corporate world a welcome one. Particularly, two terms emerge frequently in corporate discourse: corporate social responsibility (CSR) and environmental, social and governance (ESG). Both terms relate to the social responsibilities of businesses. While CSR holds businesses accountable for their social commitments in a qualitative manner, ESG helps measure or quantify such social efforts.
Here are three reasons why CSR and ESG are important to businesses if you need convincing:
1. It’s about more than the company image.
Some view CSR as a thin veil that businesses put on for branding purposes to appeal to customers. While creating a social image can help differentiate your business from competitors and boost customer loyalty, the true value of CSR lies within the company — or, at least, that’s what I believe.
CSR is about developing a strong company culture that empowers employees to do social good and embrace diversity by being kind and open-minded. CSR is important to businesses because employees can benefit from working in an inclusive environment and toward a valued social goal. Not only can such a cultural and social focus reduce work-related health problems in the workforce, but it can also boost employee retention, morale and productivity.
One way to establish a company culture that embraces CSR is to adopt a goal-oriented habit. As discussed by James Clear in Atomic Habits, behavioral change can be brought about by setting certain targets. Such an approach can be applied to companies as well. For my company, we set a goal to be a mission-driven company and a caring, inclusive employer. Having this target increased our awareness of the policies and practices we needed to adopt to reach this goal.
For instance, the establishment of our mission — to manufacture products that are essential and meaningful to human life — has resulted in a visible growth of company morale and productivity. Moreover, our caring company culture was reinforced via our CSR commitments, which serve as formal reminders of our social mission. Our commitment to being socially responsible to our employees has also helped attract and retain talent, as well as strengthen our team spirit.
As such, the true worth of CSR lies not in company image or the benefits to society (although they may be relevant) but in building a strong company culture that positively impacts our employees and our work.
2. It’s reassuring to partners and investors who are interested in the long run.
A socially conscious and responsible business is good news to partners and investors. This sentiment can be seen in the rise of ESG reporting, particularly as a requirement from public stock exchanges.
While CSR impacts internal processes and company culture, ESG is a measurable set of propositions that external partners and investors look at in their evaluation of a company. ESG illustrates a company’s identification and quantification of its risks and opportunities, as well as highlights the ethics of a company. Such measurable considerations are beneficial both for external partners and investors and company executives in making strategic decisions.
For instance, ESG can help identify areas where the business is wasting resources to allow for optimization and areas where key performance indicators can be set up to measure procedures or policies in the company that can contribute to ESG goals. For my company, our ESG goals mean being ISO 14001 certified for environmental management and planning for the simplification and digitalization of our internal processes for better “governance” of our operations.
Businesses with proper and actionable ESG criteria have more sustainable practices (in terms of business resilience and socio-environmental considerations), making them less likely to pursue short-term gains and more likely to succeed in the long run. Such comprehensive considerations become signals of organizational strength and long-term vision that can appeal to risk-wary partners and investors, which is always good news for businesses.
3. It makes financial sense.
As hinted by previous points, a socially responsible business makes financial sense. CSR’s internal boost to company morale and productivity creates a workplace that is conducive to quality work. Couple this internal environment with a business mission or company image that appeals to customers and you have a business that is well-positioned for sustained growth and development.
Secondly, the ESG criteria helps ensure that internal processes are socially and environmentally sustainable. Specifically, a proper ESG program can lead to cost savings by reducing waste and optimizing resource allocation. An ESG program can also help attract and retain top talent through equitable employment policies, boosting company productivity and reducing costs related to high turnover rates and subsequent induction training.
These qualitative (cultural) and quantitative (cost) benefits illustrate the importance of social considerations to all aspects of our business. In other words, it makes business sense to be socially responsible.
Social responsibility is a beneficial commitment
Committing to socially and environmentally equitable practices may seem overwhelming at first, especially when returns to the business are unclear or hard to quantify. However, when properly implemented, CSR and ESG can provide the guiding principles and measures that make social commitments actionable and directly beneficial to one’s company, especially in the long run. Considering the business benefits and the meaningful social differences we can make with such practices, it is definitely a win-win situation.
By Carl Hung,
President & CEO of Season Group.
Originally published on Forbes on 23 September 2021