Despite large budgets and even larger PR smiles, Corporate Social Responsibility (CSR) initiatives are coming under closer scrutiny from industry watchdogs and consumers. This is mainly due to the increasing belief that, behind the CSR fa?ade employed by many companies, business practices have remained relatively unchanged.
China is fast becoming a key market for many large multinationals but, as in the West, little research has been done on Chinese expectations of corporate social obligations, and whether they will act on these expectations if they are broken.
Criticism of corporate failure to deliver on social objectives arises from the growing realization that the long-term impact of CSR initiatives is often ineffective and fragmented. Such criticism has prompted a closer look at how corporations implement and evaluate their CSR programs.
Research has found that CSR, traditionally used as a PR tool within marketing, is often focused purely on influencing consumers. Wider consultation with key groups is frequently overlooked. The current consensus is that when CSR engages both internal and external stakeholders to develop and monitor programs, it not only has a greater chance of sustainability, but also of having a positive effect on a company's bottom line.
CSR implemented as a cohesive program supports bottom line growth through better brand alignment with a cause that consumers feel is believable. Through the exploration of alternatives within the entire value chain, new and more dynamic opportunities for problem solving can also arise.
Companies may feel uncomfortable treating CSR as a strategy to support growth, as doing so seemingly goes against the grain of pure philanthropy. However, an increasing number of investors seeking sustainable and ethical investments still demand complete transparency and accountability. CSR that is focused on business growth aligns shareholder expectations with social ones.
Given that correct implementation can help secure long-term profits, it is surprising there is little research on stakeholder needs and expectations. Current corporate research tends to focus purely on brand health, incorporating consumer opinion and brand recognition, with CSR's impact viewed as an intrinsic component of that.
However, brand research isn't a clear measure of a company's reputation – firms with strong brand presence still may not survive a public campaign against them. A sincere take-up of CSR by a company addressing wider issues requires research that would help ensure its CSR budget is aligned with stakeholder expectations, and that programs deliver on promises.
For the last two decades, the West has been very interested in the business practices of the mainland companies that produce the goods they consume. This has resulted in the CSR debate in China being quite advanced for a still developing market. However, little attention has been paid to the effectiveness of CSR programs in China, and even less on whether Chinese will reward a company that engages in CSR or punish one for reneging on its social contract. Research shows they will.
When Chinese respondents were asked in a recent ACNielsen study whether they would feel greater loyalty towards a company that supported a charity, 41% agreed. They also indicated that CSR could potentially influence switching, with 53% agreeing they would move to a brand if the price was the same. As many as 33% said they would consider moving even if the price was slightly more expensive.
This is important in light of China's enormous and increasingly competitive market – 6,000 new products hit the shelves each month – where local brands now offer stiffer competition to international ones. CSR can play a vital role in differentiating the brand and promoting the core vision of the company. Those that do not implement CSR initiatives run the risk of being compared with – and losing out to – more ethical competitors.
This is true not just for consumers choosing which brand to buy, but also in terms of a company's employee loyalty. In a separate study, over 30% of respondents who indicated they were currently disloyal towards the company they work for said that they would feel more loyal if the company supported a charity. Furthermore, over 60% indicated that this kind of philanthropic activity would give them greater job satisfaction.
The study went further to look at how this loyalty could be achieved and what employees thought of their company's CSR initiatives. As many as 86% of disloyal employees wanted to be involved in their company's CSR efforts, and over half felt that internal CSR communications were ineffective and not part of the company's core vision. This is in direct contrast to loyal employees, who felt they received messages effectively and understood that CSR was a key focus of the business.
As in the West, CSR in China has the potential to affect positive bottom line growth when implemented correctly. This growth is achieved through the alignment of CSR objectives with core company strategies, using key company resources, and using CSR as a catalyst for innovation.
Despite little research being done on this area in China, consumer and employee studies support the idea that Chinese consumers will become more attuned to a company's social obligations. Therefore, it is possible they will attach greater weight to whether they perceive these obligations have been fulfilled when making consumer decisions. Research is pivotal to ensuring the company meets stakeholder expectation, thus supporting bottom line growth.
Antonia Irwin is communications and CSR manager for ACNielsen China