Why is social responsibility important to a business?

Social responsibility has become increasingly important to companies over the last several years. Whether it's by empowering women, helping the environment, or trying to end poverty, more and more companies are incorporating social responsibility into their overall business strategy. The social issues may be local, national, or global, but a concern for the health and wellness of others that do not involve sales can be seen as commendable. There are many reasons why a company might engage in social responsibility, and in this article, we'll outline a few of them. 

Being a socially responsible company can bolster a company's image and build its brand. The public perception of a company is critical to customer and shareholder confidence in the company. By projecting a positive image, a company can make a name for itself for not only being financially profitable, but socially conscious as well. Also, by being active in the community, a company's employees are engaging with potential customers and in doing so, indirectly marketing the company in the process. 

Building relationships with customers is the cornerstone of a successful company and having a social responsibility policy can impact the buying decisions of customers. Some customers are willing to pay more for a product if they know a portion of the profit is going to worthy cause. Also, if a company is active in the local community – for example, a bank that offers loans to low-income families – the company will be viewed positively by the community and perhaps boost the company's sales as a result. In short, building a positive relationship with customers and their communities can lead to increased sales and rising profits. 

Many employees want to feel like they're part of something bigger. Social responsibility empowers employees to leverage the corporate resources at their disposal to do good. Some public corporations' employees number in the tens of thousands, and when they get behind an initiative, the results can be amazing.  

Furthermore, being part of a strategy that helps the greater good can boost employee morale and lead to greater productivity in the workforce. Knowing a product and service is also helping with social causes can create a sense of pride and that pride shows in relationships with customers and fellow employees.

When companies are involved in the community, they stand out from the competition. Building relationships with customers and their neighborhoods helps improve the brand's image. For example, Elon Musk, CEO of Tesla Inc. (TSLA) has bridged the gap between the corporate world and his socially responsible vision by offering electric-powered cars and environmentally friendly automotive products. 

In 2010, Coca-Cola started the 5by20 initiative to empower women across the globe. 

"The Coca-Cola Company’s global commitment to enable the economic empowerment of 5 million women entrepreneurs across the company’s value chain by 2020."

Through its Financial Inclusion program, Visa has developed innovative ways of bringing digital cash to places in the world where the financial infrastructure doesn't exist or for people who don't have access to the financial system, like residents of many third-world countries.  

Today, about half the adult world lives in the informal economy, dealing exclusively in cash. To be one of these estimated two billion people is to face financial barriers that make life risky, expensive and inefficient. Financial Inclusion helps put people on a path out of poverty, creates productive, empowered citizens, fosters business opportunities and fuels economic growth.

When social responsibility is recognized as part of a company's business model, it can attract positive publicity, help attract and retain top talent, and improve relationships with customers and their communities. The benefits can be far and wide, including client retention, improved sales, and financial success. 

For more on this topic, please read What Are Socially Responsible Mutual Funds?