Definition of business case for corporate social responsibility

This is a set of arguments detailing the potential benefits gained by firms if they invest in corporate social responsibility.  Benefits include enhanced corporate image and increased staff loyalty.

Example

Many firms have found that acts of corporate social responsibility (CSR) can have financial benefits, such as increased product differentiation that can appeal to consumers, for example fair trade or organic goods.  They may also experience decreased operating costs.  For example, with increased staff loyalty, they have lower costs in recruiting and retaining employees and reduced turnover costs.

Firms that are known for their corporate social responsibility can benefit from lower costs in setting up operations as, for example, they are not challenged by “not in my back yard protests”.  This term refers to the objections raised by people who are against plans for new developments or projects near them, e.g., a nuclear power station.  One example is Wal-Mart versus Target where Wal-Mart often faces stiffer legal challenges when attempting to site new stores and has been unable to enter some locations, despite costly and extended legal battles, where Target has gained entry, such as Manhattan, New York.

Firms may also have increased ease of access to favourable relationships with partners and suppliers and lower risk of regulatory fines.

To the degree that these benefits exceed the costs of engaging in the acts, a business case is made.  As such, corporate social responsibility can be seen as enlightened self-interest.  This means the firm recognises that although CSR investment is costly in the near term, there will be offsetting gains in the longer term.  For example, a firm that funds a college scholarship now may become an employer of choice for talented employees years later.

Often the benefits are intangible, such as improved reputation and enhanced stakeholder relationships, and so can be difficult to quantify.   The business case stands in contrast to the ethical case, which can encourage firms to engage in corporate social responsibility even where it causes financial losses. [1]