Indeed, there are so many ways to define the success of a corporation but, none so clear and solid like the financial performance and that is why this way matters more than the other ways while gauging the corporation’s popularity and capability. But boosting the financial performance also depends upon a number of factors, of which the CSR factor is significant.
What is CSR?
CSR aka Corporate Social Responsibility is the set of initiatives carried out by an organization to ensure the well-being of the society and environment, appreciably. These initiatives might be concerned with the corporation’s products or services or might also be generic. That is, say if the corporation is manufacturing one of the cooking oil kinds! How they sensibly carry out the waste management process without disrupting the environment and the society around and as well as, how they sustainably grow the crops involved (in case of almond, castor oil etc.) are some parameters to measure their socially responsible nature, in which the organization is directly involved.
Otherwise, it can contribute to generic social responsibility factors like afforestation, climate change and so on, in which organizations’ products or services might not be directly related to.
CSR and Financial Performance
Now that we have understood what CSR is, let us see its impact on the ‘Financial Performance’ of an organization. The financial growth of an organization also depends upon its CSR, for which the following 4 reasons are the proof.
The awareness about being socially responsible is on the rise these days, as people have started to realize that the exploitation of the environment would lead to the destruction of the society and therefore, they are very much eager to associate and appreciate those who are socially responsible, especially the Brand, whose products they take pride in using. Hence, improved CSR performance means improved brand recognition that naturally, leads to the increased financial performance of the organization through increased sales.
Investors these days, are only willing to associate themselves with a less-risky corporation and therefore, the corporation with better CSR rating will obviously have the better interest of the investors that help the corporation to improve its financial performance with the help of increased capital.
A socially responsible organization, would not only have transparent working policies but also interest the employees to do best for the cause, which leads to increased employee engagement, appreciably. Increased employee engagement means more products that can lead to the improved financial performance of the corporation through its increased output.
When a corporation starts believing in being socially responsible then, naturally it will adapt to the cost-cutting ways or the minimum wastage ways, which lead to the improved financial performance of the corporation, indirectly!