The ROI of CSR: How one company generated a $600 million return

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The ROI of CSR: How one company generated a $600 million return

Return on investment
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It can pay to invest in human resources strategies that incorporate sustainability and social responsibility.

Any successful CSR program produces positive returns to employees. We’ve all seen research showing how a company’s sustainability program creates a more satisfied and committed workforce.

We intuitively understand how this happens: If you feel engaged in your company’s mission, you’re probably happy to work hard on its behalf. This is true for a growing portion of the workforce seeking purposeful careers.

Enthusiastic employees also make productive employees, creating a virtuous cycle for the company’s CSR investments and its competitive advantage.

But let’s go beyond the easy narrative; sustainable HR management involves more than creating a culture of co-worker goodwill.

Tangible value of CSR

ProjectROI, a report put out last summer by IO Sustainability and Babson College and sponsored by Verizon and Cambell Soup Company, provides hard evidence of the financial and business returns of CSR investments and, more important, discusses the company practices that can unleash them.

In their review of over 300 studies, co-authors Steve Rochlin and Stephen Jordan lay the question of whether ESG practices "drive or distract" from tangible financial performance to rest. They examine everything from market value and risk reduction to branding and sales, documenting quantitative evidence that CSR programs can improve company performance.

On the HR front, the numbers are impressive: CSR programs can increase productivity up to 13 percent and reduce the employee turnover rate by up to 50 percent for large, publicly traded companies. For each employee that is retained, companies can save up to 90 to 200 percent of that employee’s salary.

Prospective employees also view firms with high corporate social performance as more attractive; workers are willing to take up to a 5 percent pay cut to work at these firms.

Further, workers that are well informed about the company’s CSR efforts are more likely to go "above and beyond" by doing extra work not required for payment, particularly high performing workers.

Case study: IBM’s Corporate Service Corps generates 300% ROI

Take the case from the report of IBM’s Corporate Service Corps program, which enables employees to share their professional skills with a company in a developing country.

IBM

Global IBM employees on a Corporate Service Corps trip to Peru.

In addition to contributing to skill development and new market creation, the Corporate Service Corps attracts top talent to IBM and bolsters retention.

Staff turnover for participants in the program is 1 percent, compared to a company-wide rate of 12 percent.

Since the program’s launch in 2008, IBM cites a $600 million return on its $200 million investment.

The secret’s in the sauce

These numbers prove CSR’s potential benefits, but they are far from the end of the story. The difference between a substantive CSR program and empty PR efforts is everything, said Rochlin.

As Rochlin shared with us, "The companies that get value from CSR and sustainability are the ones that fit the design of their programs into their business model, strategy and culture. Once they do that, they commit to CSR as a core discipline that has metrics to create value. It’s not enough to run through a checklist of CSR activities."

As with every aspect of business management, some CSR investments succeed and others will fail. Their design and management is key.

This means articulating a commitment to specific goals, aligning CSR practices with business strategy, establishing quantifiable management metrics and seeking authentic buy-in. 

A four-pronged approach can help:

1. Fit

Company CSR should align with its core attributes given its products, industry and branding. For HR, this means understanding employee expectations for a CSR program and communicating how it fits with their needs and company goals. A company can identify three typical employee segments based on their attitudes to CSR — Idealists, Enthusiasts and Indifferents — to guide the focus of its initiatives.

2. Commit

Treat employees well, through thick and thin. Companies that make moderate commitments to CSR fare poorly, the paper finds. When CSR is pursued deliberately and consistently, financial performance is enhanced.

3. Manage

ProjectROI encourages companies to view CSR practices as a value-creating asset base. The same management disciplines applied to regular business functions also should apply to CSR assets. Involving employees as partners in developing CSR strategy and related implementation delivers dual benefits of building an effective approach and improving employee engagement metrics.

4. Connect

Linking CSR initiatives to specific values can resonate with employees’ personal motivations and cultivate company pride. When employees feel closer to a CSR program, they are more invested in its success and the company as a whole. HR departments then can showcase these employee-driven CSR initiatives to attract talent seeking impactful work.