REPORT

To: The Board of Directors From: Corporate Affairs Manager Date: Subject: A Case for Corporate Social Responsibility

Introduction Following the impasse among members of the board on the nature of the company’s philosophy and strategy on corporate social responsibility, this report was commissioned to make a case for corporate social responsibility in order to help the board to formulate an appropriate CSR strategy. Below are the arguments in favour of CSR.

i. Customer expectations – There is an increasing expectation from consumers and other stakeholders that businesses will act in a more socially responsible manner. This is a global expectation. For example, from the food they eat, to the coffee they drink and the clothes they wear, consumers are becoming more aware of the origins of the everyday things they buy, and they want to buy products that are responsibly sourced.

Given that one of the key success factors for a business is the ability to offer customers what they want, then offering products and services which are deemed to be socially responsible could help boost sales. In this respect, CSR could provide opportunities to enter new markets or develop new products.

ii. Brand name – Being seen as socially responsible can help enhance a business’s reputation and therefore its brand. Customers may prefer to deal with a business they feel is socially responsible rather than with one which is not. Therefore, CSR could actually be a source of differentiation for a business.

iii. Lower environmental costs – If firms improve the efficiency of their energy usage, for example, then as well as making lower emissions they will also have lower cost bases. If firms can achieve a lower cost base through the efficient use of resources, this could help them create or improve their competitive advantage.

More generally, firms could also find it is less costly to regulate their own activities voluntarily than ignoring social responsibility in the short term and then having to comply with statutory regulations (in the form of taxes or fines, for example) which may imposed on them later.

iv. Trade opportunities – If firms are perceived as not being socially responsible, they may find it harder to attract trading partners, or support from nations and local communities where they might want to invest.

v. Access to staff – Similarly, the way firms are perceived to treat their employees may affect their ability to attract staff. For example, firms that are perceived to offer good working conditions are likely to be able to appeal to a higher caliber of staff than firms which are perceived to offer unfavourable working conditions. In turn, a firm which is able to attract (and retain) high quality staff may be able to generate competitive advantage over a firm which is less able to recruit good quality staff.

vi. Investment and funding – A firm’s reputation may also affects its ability to attract finance, particularly from ethical investors. For example, obtaining a listing on the FTSE4Good (index of companies that meet globally recognised corporate responsibility standards) is likely to help a firm attract finance from ethical investors.

vii. Sustainable business – Taken collectively, the arguments in favour of CSR suggest that a socially responsible business is likely to be able to operate for longer in society than a less responsible one. In turn, if the business can expect more years of cash flows in the future, it might be reasonable to expect the value of the company to be higher than that of one whose future is perceived to be less secure.

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