Insightegy Consultants

Corporate social responsibility has often been called a waste of shareholders money; it has never been referred to what it actually is: an integral part of a firm’s marketing strategy. Firms need to become more comfortable with its use as a means of marketing and learn where to benefit financially from its impact.

Looking through the annual reports from the last ten years of any major firm provides a good insight into the emergence of corporate social responsibility. What began as an ad-hoc initiative by a few firms warranting no more than a line or two in the CEO’s welcome, has now become a broader agenda occupying several pages and permeating throughout the document. It has found its way into the mission statements of companies working in sectors ranging from pulp and paper to FMCGs.  The buzzword is ‘sustainable:’ in P&G’s 1998 annual report, it isn’t even present; in last years, it was used 11 times.

However, despite CSR’s emergence in the mindset of top management, a rake of press coverage and even on the business school curriculum, its usage is very often misguided and ineffective.  CEOs are expected on the one hand to consistently improve financial results and on the other, to implement philanthropy that touches as many of the company’s stakeholders as possible. This would be a difficult enough task on its own. It becomes more difficult to achieve when one considers that most of today’s CEOs didn’t have the benefit of a CSR-module when they were doing their MBA.

The current generation of CEOs holds the pioneers of CSR. It’s relatively recent appearance on the corporate agenda means that not only is it underdeveloped, but its potential for impacting company growth is as yet unrealized. When Milton Friedman stated that the company’s only responsibility is to maximize shareholder profits, he failed to acknowledge that there are several methods of doing so, not all of which provide easily measurable returns. Marketing is widely acknowledged as being one such measure; a well-defined CSR strategy is another.

We propose that CSR in the future will form an integral part of a firm’s marketing strategy. While a marketing campaign aiming to target a particular segment can make or break a firm’s financial year, CSR can hedge the risk on the firm’s financial results.  A new product might not be to everyone’s taste but it is almost guaranteed to sell more effectively if delivered to the market with a CSR element, be that a fair trade tag or recyclable inputs. A 2005 Harvard study showed that customers not only want a socially responsible element to their purchases, but are also willing to pay considerably more for it.

Like any good marketing strategy, firms can use CSR to differentiate the firm and its products from its competitors. Body Shop is the textbook example. Anita Ruddock, its founder, wasn’t the first to develop cosmetics which refrained from animal testing. However, she was the first to leverage the potential of this CSR in her marketing. In the case of Body Shop, the whole marketing budget was dedicated to CSR; most firms will decide to dedicate less of the budget but the principle of using CSR as a marketing tool instead of a philanthropic throw-in-the-ocean still applies.

CSR is a marketers dream:  a part of marketing that can potentially appeal to every stakeholder and simultaneously raise margins. It is sniggered at in some quarters for its association to tobacco firms who want to educate teenagers about the dangers of smoking and oil giants who stress environmentalism, but it need not be so frivolous. CEO’s who view CSR as a tool rather than an obligation, and figure for it in their marketing budget are primed to achieve greater financial returns.