CSR programs can provide a double whammy of helping a corporation fit into the sought after ESG category while also, and more importantly, increasing productivity and potentially reigniting burned out employees.
Can Corporate Social Responsibility (CSR) reignite your workplace? Maybe. The area of corporate social responsibility programs became heavily scrutinized in 2020 for a variety of reasons. One of them being a social upswelling of support for racial justice campaigns. Another reason, perhaps more quiet, is the increasing growth of socially responsible investing (SRI), or investing that focuses on companies with strong environmental, social and governance factors (ESG). As we’ve touched on the in the past, money managers and community investing institutions are increasingly using SRI criteria, like ESG factors in choosing funds. It’s estimated that 90% of institutional investors find that investment plans that incorporate ESG factors will perform as well as traditional ones. In 2019, SRI funds were performing strongly. As we stated,[1] “SRI mutual funds slightly outperform traditional funds: the difference at three years is the most significant at an almost full percentage point of annualized rate of return (5.5% for SRIs to the 4.7% for traditional funds). The difference between the two types of funds levels out towards a 10 year time period (with 8.9% for SRIs compared to 8.5% for traditional funds).” This success may not have been sustained at the same level in 2020, but the urge to invest in them arguably stayed the same. As a recent report from Morningstar stated[2] “Success didn't depend as much on the level of ESG risk when the fund was explicitly trying to minimize ESG risk, though it’s worth noting that as a whole intentional funds succeeded more often than non-intentional funds.” In other words, ESG funds didn’t necessarily take a beating in 2020.
How does Corporate Social Responsibility play into SRI? Well, for starters,[3] “To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them.” That means, a company decides to operate in a socially responsible manner. In discussing CSR, Investopedia provides a case study of Starbucks, who set goals of reaching 99% of ethically sourced coffee, creating a global network of farmers, pioneering green building throughout its stores, and contributing millions of hours of community service. In other words: sourcing goods from a responsible partner, using logistics as an opportunity to increase fair trade, and encouraging volunteerism to enhance its role as a community member. Most CSR programs include a hefty chunk of philanthropy. In one job listing for a senior executive for CSR, most of the responsibilities included working with the online giving platform (Benevity) and with internal stakeholders on a charitable giving platform. Another critical aspect of CSR includes how to engage employees in social impact efforts. And that’s where the reignition can begin.
Some CSR is a no-brainer, like when running shoe giant Brooks announced that as a part of its CSR, it would provide all of the shoes for the nonprofit Back on My Feet, a program that recruits members from homeless facilities, and uses running as a method to provide self-esteem, and reinforce delivery of job training, employment referrals and housing. Similarly, communications network creator CISCO sent volunteers to Puerto Rico in 2017 after hurricane Maria to prioritize rebuilding a communications network so that relief efforts could be enhanced. But other CSR programs are more unstructured. For example, Xerox’s program funds employees in projects of their choosing and nearly half a million employees participate.
While CSR may help a company fit into an ESG fund, it may have a greater impact on employee productivity than on investor interest. Here’s why: employee burnout is a major, “top of mind” issue for employers and was a high concern prior to the pandemic.[4] And those employers are wise to be concerned. As reported by the American Psychological Association,[5]“Two-thirds of employees report that poor mental health has undercut their job performance during the COVID-19 pandemic, and 40% of employees are battling burnout...” In short, employee burnout is a major issue, potentially costing employers large amounts of money in lost productivity, recruitment, and training.
As reported in Business News Daily, a study published in 2020 from consulting firm Deloitte showed that volunteerism through work has some significant impacts.[6] “89% – of employees think organizations that sponsor volunteer activities offer a better overall working environment. In addition, 70% believe volunteer activities are more likely to boost staff morale than company-sponsored happy hours, with more than three-quarters saying volunteering is essential to employee well-being.” Studies show that burnout is negatively correlated to employee engagement: the more burned out, the less engaged your employees are. One of the methods for reversing employee burnout is to re-engage (or reignite) employee engagement. In other words.[7]“Burnout is reversible… Increasing engagement is both the cure for and the benefit of reducing burnout.”
CSR programs can provide a double whammy of helping a corporation fit into the sought after ESG category while also, and more importantly, increasing productivity and potentially reigniting burned out employees. “CSR has been found to increase a business' market value by up to 6 per cent, increase employee productivity by 13 per cent, and improve employee engagement by up to 7.5 per cent.”[8] Harnessing the volunteering side of CSR, rather than just the charitable elements, can help reignite burned out employees.
[1] See the whole article here: https://www.bcgbenefits.com/blog/socially-responsible-investing
[2] See more at https://www.morningstar.com/articles/1016714/did-esg-pay-off-for-fund-investors-last-year-yes-and-no
[3] https://www.investopedia.com/terms/c/corp-social-responsibility.asp
[4] https://www.hrdive.com/news/employee-burnout-remains-a-major-concern-for-employers/593071/
[5] https://www.apa.org/monitor/2021/01/trends-employers-support
[6] https://www.businessnewsdaily.com/10007-encourage-employee-volunteer-work.html#:~:text=An%20employee%20volunteer%20program%20does,the%20employees%20in%20an%20organization.&text=When%20your%20employees%20feel%20good,the%20culture%20of%20an%20organization
[7] https://www.cpiworld.com/engagement-as-a-solution-to-the-high-cost-of-burnout/#:~:text=Increasing%20engagement%20is%20both%20the,satisfaction%2C%20or%20the%20bottom%20line
[8] https://www.power2motivate.com/news-blog/blog/how-can-you-use-csr-to-boost-employee-engagement#:~:text=CSR%20has%20been%20found%20to,per%20cent%20(Project%20ROI)
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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