Corporate social responsibility is becoming increasingly popular as organisations compete to prove they really do care about their impact upon society. Is this nothing more than a cynical PR exercise or does it really affect the bottom line? Sarah Fletcher looks at how CSR policies influence employee retention and productivity and asks if it’s really worth the trouble.

How important is CSR to business success?

Champions of corporate social responsibility claim a sound CSR policy will improve an organisation’s commercial success by strengthening its public image – a survey by Ashridge Centre for Business and Society, The new business responsibilities: a survey of management practice and attitudes, found 88 per cent of senior managers said an organisation that was environmentally responsible would enjoy a commercial advantage. However, one director says the customer might not care at all about ethical policies – it may make no difference to the company’s public reputation if measured in sales figures. Andrew Wilson, Director of Research and Development at the Ashridge Centre for Business and Society, argues that the public may claim to care about a company’s environmental ethics but this ends at the checkout: “Lots of consumers will say they want to buy environmentally responsible products but the reality is few of the population actually buy them. When it comes to it they’re not prepared to pay a premium.”

However, a CSR strategy can have a significant impact upon recruitment. Whilst a poor CSR policy may not significantly affect sales figures, Wilson says the organisation may struggle to attract high quality employees: “Consumers don’t really boycott the product … but recruitment becomes more difficult.” He adds: “Employees clearly want to be seen to be working with an organisation that’s taking steps to manage its environmental responsibilities.” According to Wilson, the more skilled and senior the workforce, the more important the CSR policy becomes to the organisation’s goal to attract and keep these key employees: “People who are better educated, more senior, are going to be managing their responsibilities in this way … The top people have greater job mobility and more choice, and are more likely to choose an ethical company over one which isn’t.”

What’s the evidence?

But is there any solid evidence to prove that a company’s CSR programme affects its ability to recruit and retain staff? Rosena Robson, head of business marketing at the Energy Saving Trust, says proving the business case has always been an issue, but many organisations wouldn’t bother with social responsibility programmes if the only benefits were a sense of ethical virtue and a general rosy glow: “A lot of these businesses wouldn’t be doing it if there wasn’t a bottom line impact,” she notes. However, Robson adds that many companies are reluctant to share this information and Patti Whaley, HR director of sustainable development organisation Forum for the Future, points out that it is very difficult to separate the impact of a CSR programme upon retention rates from other initiatives such as benefits packages and salary, for example.

Wilson identifies an “intuitive sense” that a sound CSR policy will attract more qualified, higher quality employees; and it seems that many organisations judge the success of their social responsibility programmes based upon anecdotal evidence – for example, surveys measuring employee satisfaction and the reasons candidates give at interview for wishing to join the company. Perhaps unsurprisingly, Oxfam’s rewards manager Frances Richardson says the charity’s purpose and reputation are key factors for employees in choosing to work for the organisation. “Acting in terms of our own values is especially important in terms of motivating and retaining people,” she says. “People primarily join us because of our purpose as an organisation.” Emilie Carmichael, internal communications manager at the Energy Saving Trust, agrees that the organisation’s ethical goal is “what employees believe in and why they work here.”

Perhaps the charity sector is a unique example of an area in which staff are particularly concerned about their employer’s social responsibility policy; as UNICEF’s interim head of HR Geoff Paterson notes, “most people who work in charities are people who first of all want to work in the charity sector” specifically because of the type of work it does and the values it promotes. Does this commitment to a company’s ethics extend to the private and public sectors as well? According to the Ashridge survey The new business responsibilities, an organisation’s reputation for socially and environmentally responsible behaviour was very important for 59 per cent of managers in considering whether to work for a company and very important for 47 per cent in deciding whether to stay with their current employer. However, according to the report’s author Adam Faruk, “evidence from this survey strongly implies that there is a considerable body of managers who feel that their values are at odds with those of the organisation for which they work.” The survey suggests that if organisations wish to retain their staff and encourage new individuals to join the company, a good CSR policy is necessary.

Committing staff to CSR policy

If an organisation’s CSR programme significantly affects the commitment employees show to the company, it is important to publicise and promote this policy to staff. The theory is that by involving employees in formulating and carrying out social responsibility strategy, they will feel greater loyalty to what the organisation is trying to achieve and are less likely to resign. Paterson says the private sector has benefitted charities by showing that regular consultation with employees offers real rewards: “The charity sector over the last few years has picked up on the good things happening in the commercial sector. They have involved employees much more by feeding back, consulting and looking for solutions.”

Although UNICEF’s New York-based head office decides corporate strategy and which ethical issues should be prioritised (the charity is focusing on addressing HIV and AIDS in 2006), UK-based employees are involved in making decisions that affect Britain specifically. Paterson says this helps to engage staff with UNICEFs work and the organisation uses an annual attitude survey to find out how satisfied employees are with the charity’s goals and what it has achieved. The whole process takes two to three months and over the coming year UNICEF takes into consideration the comments its staff have made about its CSR practices.

Richardson says strong communication with employees on Oxfam’s ethical practices is especially important because as a charity the organisation cannot try to engage staff with financial incentives and attractive benefits packages like those available to the private sector: “As a charity, in terms of how we reward staff, we try to strike a balance between the needs of the organisation and what our supporters and donors think … They expect us to be fairly modest in what we spend on ourselves,” she comments. It is important that Oxfam promotes its CSR policy to employees because of the necessity to offer benefits to staff that are cost effective.

Carmichael at the Energy Saving Trust says cost savings are only a bi-product of the organisation’s main goal in promoting its responsible business practices: “We haven’t been doing [environmentally responsible practices] for cost purposes; we have found that we have made cost savings, but it’s about practising what we preach,” she notes. Using an intranet, regular presentations, conferences with staff and a weekly newsletter, the EST aims to engage staff and improve its environmental policy according to the ideas offered by employees.

Proving the business case – Is assessment worth it?

According to Whaley, staff see measuring CSR as an administrative headache: she says there are “lots of beaurocratic overheads that go along with a system like [the BSI we use, which is an international standard that measures general quality management control] – the staff perceive it as beaurocratic [and they often question] why we do that.” Time spent preparing information for this standard feels like a burden; she adds it “feels like there’s not much value added.” However, as Andrew Wilson from Ashridge points out, this information is crucial for an organisation’s commercial success: “the public, the media and increasingly shareholders are looking at a company’s environmental record,” he says. A poor history of socially responsible practices will be noticed and will damage a company’s reputation.

Rosena Robson points out that assessing an organisation’s CSR policy is key to proving the business case for corporate responsibility and understanding the impact not only on employees but on customers, suppliers and the communities in which businesses operate. As corporate social responsibility achieves ever increasing importance for employees in deciding whether to work for a particular organisation, companies will have to think carefully about their CSR policies: “Over time the businesses that aren’t taking a very firm, solid stance will need to change,” she adds.