Corporate social responsibility continues to be of growing importance to consumers. People want to know that they are investing in businesses that invest in their communities. As such, a company that has a strong corporate social responsibility commitment from the beginning, is better positioned to woo savvy investors and develop customer loyalty.
So often, businesses establish their corporate social responsibility as means of appealing to the increase in socially-conscious consumers, or as a response to a public relations crisis (75% of consumers are reported to taking negative action against irresponsible companies). However, today’s entrepreneurs and start-ups are uniquely positioned to already lay their foundation of corporate social responsibility, giving added value in the eye of the consumer, right from the start.
Obviously, start-ups are concerned with the bottom line, with turning a profit. The idea of giving away money while still trying to earn it can seem counterintuitive. As such, it may seem unfair for investors to expect a startup to look at their corporate social responsibility commitment from the early Seed or Series A rounds. However, rather than seeing it as a frightening prospect, more and more entrepreneurs are seeing it as an opportunity. At a time in which everyone, from consumers to investors to business owners, are increasingly concerned over any number of social issues, people are seeing the call to activism.
This means that a business, even a startup, should see the need for strong corporate social responsibility as two-fold:
The latter should come as no surprise when one considers that last year, corporate giving surpassed the tens of billions of dollars.
Additionally, by defining your corporate social responsibility statement early on, you are demonstrating to both investors and consumers that you plan on sticking around for awhile. After all, it can take time to really get your CSR efforts going. Furthermore, it serves as an invaluable way to recruit passionate, hardworking employees who share the same dedication as you.
The same is true of recruiting your board: not only can this serve as a means of recruiting equally dedicated board members, it can provide an opportunity to activate the existing board members, by getting them involved with your company’s charitable efforts. For those board members with their own businesses or full-time jobs, this can further open the doors to their employers, both as fellow CSR supporters and possible consumers.
If consumers are looking more and more closely at a business’s corporate social responsibility, then is stands to reason that investors should, too. After all, corporate social responsibility, (or, corporate giving, community grants…there are several different terms that can be applied) is no longer viewed as means of simply giving money away. Instead, corporate social responsibility is being viewed as a means of generating income. This is a direct result of consumers taking a stronger interest in knowing the interests of the company from where they are purchasing goods and services.
For example, the fashion-savvy shopper who also cares about the environment and sustainable fashion, probably loves supporting The Real Real. With a consignment shop business model that caters to luxury labels, The Real Real is committed to fighting the fast fashion trend that is responsible for at least 5%, or (10 million tons of clothes) of all landfill space. Additionally, The Real Real’s corporate social responsibility commitment has allowed them to join forces with such designers as Stella McCartney. This collaboration allows The Real Real to promote consignment shopping amongst the couture set. These are relationships that had been built when it was still a private company, versus as a response to an IPO announcement or public relations issue. As such, The Real Real demonstrated that early commitment to sustainability and CSR, making it that much more appealing as an apparel investment.
Needless to say, The Real Real, largely due to their commitment to corporate social responsibility, had a good day upon going public in June, 2019. The consignment company closed the day selling stock at 40% above the asking price. This makes it a win-win for both investors and consumers. The consumers are supporting a business model that promotes sustainability, the popularity of which allows the investors to quickly see their ROI.
There are any number of issues that are of increasing importance in the current workplace. Issues of gender and pay equality, #MeToo, telecommuting, corporate social responsibility…these are all under the bigger umbrella of corporate culture. More and more, investors are seeing that a culture of giving, within that corporate culture, is a sign of a company that is less likely to make costly mistakes such as fraud. In turn, it has been reported that nearly 85% of professional investors are far more likely to invest in companies that invest in their communities, that have strong corporate social responsibility commitments. These companies are considered to be more transparent in their business and financial operations, thus decreasing potential risk.
These same investors also recognize that a startup who is already investing in corporate social responsibility is additionally investing in brand management and customer loyalty. The Real Real being just one recent IPO that proved how invaluable all of those ties are.
Whether the corporate social responsibility is dedicated to the localities in which a company has a presence, is devoted to larger, national issues, or is planning on taking on a global crisis, it should be well-defined, transparent and (in the early stages) connected to a larger enterprise that can help guide the message. The benefits of which will expand far beyond the balance sheet.