When social responsibility pays off

Until recently, “profitability” and “socially responsible” have been treated as mutually exclusive terms with many under the impression that dedicating resources to promoting positive change meant diverting those same resources away from turning a profit.

And yet, in recent years, some analysts have shied away from tagging socially responsible companies with the “strong sell” label and have instead begun to see their long term growth potential. At Amalgamated Bank, we recognized the potential for profit in doing good. A shift in consumer mindset, workforce demographics and increased access to information and awareness of social businesses have turned the term “socially responsible” from one that was synonymous with lost profits to one that has investors seeing dollar signs.

As the old adage goes, “with great power comes great responsibility,” and that now more than ever, applies to companies. The top 10 corporations in the world continue to grow, generating more revenue than the GDPs of 180 of the poorest countries combined. The argument can be made that corporations, which are “outperforming” a number of countries’ economies, are better positioned to create positive change than governments. As this trend progresses, more and more individuals are developing an acute understanding of the impacts that these large corporations can have and are turning to them to lead the charge.

This fact coupled with a greater availability of information to consumers drastically shifts how individuals view companies and where they want to do business. Nielsen reported that “55% of global online consumers across 60 countries say they are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.” With the vast amount of information consumers have access to, they are increasingly aware of what type of footprint their actions will leave. Over time, this phenomenon raises the standard for the companies with which these consumers do business. That same Nielson report found an average annual sales increase of two percent for products with sustainability claims on the packaging and a lift of five percent for products promoting sustainable actions through marketing programs, showing that not only have companies realized that consumers are keeping track but also that it works.

Another area where a socially responsible strategy pays dividends is recruitment. As the largest generation in the labor force, millennials are increasingly demanding that companies be socially responsible not only in where they decide to shop, but also where they want to work. Long gone are the days when the only two main focuses of employment were job security and pay. This generation’s top talent has high expectations that their place of employment will emulate their values. A survey performed by Cone Communications found that 75 percent of millennials would take a pay cut to work for a socially responsible company and 64 percent would not even take a job if a potential employer did not have strong corporate social responsibility practices. Attracting quality employees now means having a quality social responsibility plan in place.

People often talk about the ill effects of social responsibility, claiming that it neglects shareholder needs, but, having undergone our IPO earlier this year, we know that it is actually quite the opposite. This shift towards socially responsible policies has taken place in large measure in response to shareholder needs. This, in turn, makes a socially responsible company more attractive to investors, employees, prospective employees and customers. And above all, it’s the right thing to do.