How Responsible Business Can Do Well
Responsible Businesses can do well financially by winning the support of stakeholders. These stakeholders include customers, employees, the community and shareholders.
Consumers are increasingly choosing to purchase from companies that have a reputation for responsibility. Across the EU, for example, one in six consumers either buys or boycotts a product because of the reputation of the company. Here in New Zealand, 19 per cent of consumers are making purchasing decisions each month based on green or social imperatives. Many consumers are attracted by responsible business and no one is likely to boycott a business because of its responsible approach, so responsible businesses can reach a greater share of the market, which in turn makes them more attractive investments.
Being an employer of choice is a more valuable asset than ever. Responsible businesses are better able to attract and retain staff.
This is particularly the case with Generation Y employees, because many young people are keenly interested in business responsibility. In a study of 11 leading European and US business schools, 97% of MBA graduates said they were willing to forgo financial benefits (on average 14% of expected income) to work with an organisation with a better reputation for corporate social responsibility and ethics. Reducing barriers to attracting the best and the brightest, and keeping them on board, means greater productivity and performance and in turn, increased profits for shareholders.
The community at large is also an important driver of financial performance. Business needs supportive relationships with the community in order to survive and thrive. The community provides businesses with a social licence to operate, and those businesses that act responsibly and build goodwill will be less prone to regulation and constraints on their entrepreneurial ability and the financial returns to shareholders that this generates. By strengthening community relations, business benefits from the improved wellbeing of people in the community, some of whom are prospective or existing employees, customers, suppliers and shareholders. Studies of the community’s perception of businesses it most admires show that these businesses are usually those with the highest level of social responsibility.
Shareholders can benefit financially through this support from other stakeholders. Risks can be reduced and returns increased, making shareholders more likely to invest and retain their shares in companies that are responsible. This in turn can increase share prices and the availability of capital for Responsible Business. Responsible investment and business is therefore enlightened self-interest for investors and businesses.