The Correlation Between CSR And Financial Performance Of A Company

A lot has been invested in estimating the relationship between corporate social responsibility and a company’s financial performance, both in terms of research efforts and monetary investments. However, the results obtained are not very ambiguous and this can be contributed largely to the conflict of interests arising out of each factor.

CSR and Costs Incurred

Whatever said, it is by no doubt that the two concepts of CSR and a company’s financial performances are entwined. Both CSR and a company’s financial performance contribute to the organization’s management and corporate governance as a whole. Although CSR initiatives positively contribute to an organization’s reputation, the practical application of CSR is very expensive and it is viewed as an additional cost to the company’s expense, which the company perceives a cut from its profit share.

CSR Applications

The applications of CSR are varied and unlimited and hence require both money and workforce. Some of the typical CSR initiative examples include investing in technology to reduce pollution & carbon footprint, increase employee benefits and other annual bonus packages, increase the number & amount of every sponsorship event and donations for noble causes for the betterment of the surrounding society, and many others.

CSR and Company Stakeholders

Nevertheless, the most determining factor of CSR contributions includes stakeholders’ interests. If the stakeholders are not satisfied with the initiatives taken, then corporate social responsibility serves no ground for the company’s financial operation. Dissatisfied stakeholders can hugely affect the monetary condition of a company and all future decisions of the company. Thus, it is essential that appropriate CSR frameworks must be established after thorough analysis and evaluation of the stakeholders’ interests at large.

CSR and Organisational Managers

Managers also play a significant role when it comes to CSR and company’s financial performance. This is because it is the duty of the managers to shoulder responsibility in the stakes of the company and all the individual parties concerned. Proper management of CSR initiatives by the management can result in an increased satisfaction of the stakeholders’ interests and the overall financial performance of the company. For example, good CSR initiatives such as better employee benefits will motivate employees to work better and result in more satisfied employees. This, in turn, will increase the organization’s productivity and maximize the profits earned. Additionally, the same factor will enhance customer satisfaction, which in turn will encourage existing customers to make repeated purchases and increase customer base to other like-minded consumers.

Conclusion

Thus, it can be concluded that a CSR move is a prerequisite condition to protect the financial performance of an organization. Of which, concepts such as sustainability, corporate governance, social governance, economic impacts, and environmental influences play a major role in determining the best practices required in adopting CSR activities.