While social responsibility is good for our society, is it a good investment for companies? Diverting resources towards social programs means fewer resources for company growth, making corporate social responsibility a painful investment for profits and shareholders. Taking that into account, is investing in social responsibility still worthwhile?
As firms contemplate how to allocate their funds, a recent study has shown how investing in social responsibility means sacrificing growth opportunities and potential profits.
The study calls into question the effectiveness of these investments. Consumers tend to be socially cognizant of their brands’ approaches to issues, but social awareness doesn’t necessarily change consumer choice. And yet, many companies make colossal investments toward making their companies look socially responsible. Are these companies wasting their time and money?
Image isn’t everything
According to our interview subjects, price and product quality were more important to consumers than a company’s level of social responsibility. Young consumers care about the issues that companies try to hone in on, such as the environment or workplace diversity, but it is ultimately the affordability and the price tag of the product itself that has the greatest effect on a consumer.
While young people may feel good to use brands that share their views and values, they care more about buying products that they want. This is the foundation of the consumer mindset — in our society, people care about buying goods that serve their individual goals. For many, social responsibility is a neat bonus, not a make-or-break ultimatum.
Many firms would love to hold on to the belief that their socially conscious choices are winning over the hearts of new customers, but the reality is that this just isn’t the case. People do care about these social issues, but at the end of the day, they care more about the product they’re getting.
Soothing egos, scaring shareholders
Even though it’s not always the best economic decision, customers can feel more tied to a company and a product when that brand has a positive image. However, shareholders can potentially view investments in social issues as a red flag.
While shareholders might agree with companies’ stances on issues, they may disagree in terms of the way these issues are approached. To invest in social issues is to sacrifice potential growth, as focusing on social issues means diverting valuable resources away from profits. Going in a socially conscious direction means steering away from a path that is entirely focused on profitability.
In our current market, consumers generally like knowing that the brands they shop at have a socially responsible image, but that doesn’t necessarily impact their choice to shop there. Shareholder concerns and consumer indifference seem to go unnoticed as firms are desperately trying to differentiate themselves in the market through social good. As brands continue to invest in having a socially responsible image, the benefit of these investments is worth debating.
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