CSR link to corporate performance intensifying: EU review

CSR policies increasingly seen as potential value creation strategies.

The relationship between corporate social responsibility and business competitiveness appears to be getting stronger, according to a review by the European Union (EU). In its European Competitiveness overview for 2008, the EU said employee expectation and consumer awareness of CSR related issues was intensifying. It said there was also growing awareness among companies of the importance that financial markets now attribute to social and environmental issues. The report said the strongest evidence of a positive impact of CSR on corporate competitiveness appeared in human resources issues, risk and reputation management and innovation. CSR risk and reputation management, it said, was now vital for many companies as a result of greater exposure to public scrutiny. On a positive note, it said the CSR reputation of a company was becoming increasingly important for its chances of success in recruiting staff in highly competitive labour markets, despite additional costs of CSR programmes initially outweighing the benefits for some companies. As a result, the EU report said business interest in CSR was increasingly based on opportunities for value creation not just value protection.According to the report, CSR-aware companies have been able to generate new business opportunities from innovations addressing societal problems. The creation of employee-friendly work-places, it said, also enhanced a firm’s capacity for innovation: “Enterprises in which CSR remains a peripheral concern, mainly confined to public relations functions, are likely to miss opportunities for competitiveness gains.” The review said that the cultivation of CSR business leaders was important for social cohesion: “The importance of CSR cannot be overestimated, not least since one lesson from the current financial crisis is that socially responsible entrepreneurs and CEOs are of utmost importance for the wellbeing of our societies.” The EU said the overview it had taken on the effects of CSR policies on six different determinants of competitiveness at firm level – cost structure, human resources, customer perspective, innovation, risk and reputation management, and financial performance – showed that CSR policies could have a positive impact.
Link to review