Socially responsible business conduct is becoming an increasingly important topic. Not only will this contribute to a better society for all of us, but it will also help your firm be a more successful business, as we detail below.
1. Higher attractiveness to consumers and investors (transparency)
Consumers and investors consider socially responsible firms to be trustworthy, transparent, and attractive. And there is a good reason for this. The decision to invest a part of profit back into a company and the environment in which the firm directly or indirectly operates not only contributes to building and maintaining a good reputation and the loyalty of existing clients but also helps a company reach a wider spectrum of consumers and investors. Such activities include supporting individuals and communities, initiating or engaging in humanitarian, public benefit, and educational projects and other activities with a positive impact on society.
A firm’s socially responsibility is also perceived positively by investors, for whom credibility, transparency, and business ethics mean a lower risk as regards investment decision-making and higher company value.
2. Better competitiveness and brand building (communication of the sustainability report)
The success of firms and their ability to be competitive on the market is increasingly defined by the extent to which they are perceived as a responsible part of the society in which they directly or indirectly operate. The growing interest in the ethical and moral aspects of business conduct means firms with a proven impact on society are preferred by many market participants. The firm’s score in this area is taken into account not only by clients and suppliers, but also by banks and other financial institutions, as more progressive companies can gain access to preferential loan products.
Therefore, a timely decision to incorporate social responsibility into business priorities and corporate culture ensures that a firm not only remains competitive but also brings a long-lasting advantage for a company. Being a socially responsible and sustainable firm also strengthens its image and builds the company’s brand. If the brand’s message and purpose are in line with the company’s values, they can attract new customers, new talent, and move the business forward in the long-term future.
By publishing a sustainability report, firms publicly demonstrate transparency about their business conduct. In this report, they present information about the activities they carry out to support environmental, social, and economic development, which contributes to higher sustainability of their business.
3. Risk management and identification of new opportunities
A properly set projection of ESG and social responsibility principles into business conduct also strengthens a firm’s ability to adapt itself to, and significantly mitigate, threats from climate and environmental risks. This will allow a firm to identify, manage, and handle more effectively physical risks and the resulting financial risk associated with the impact of climate change and extreme weather phenomena, which could lead to property damage, lower productivity, or disruption of supplier relationships, and the transition risk associated with a firm’s potential direct or indirect financial loss as a result of adaptation to a low-carbon and environmentally more sustainable economy.
In addition, a wider spectrum of opportunities is available to sustainable, responsible companies (e.g. access to new markets, creation of new products or services, exploitation of new raw materials and energy from renewable sources, streamlining the workflow, etc.).
The market is gradually adapting to these changing conditions, and the future position and identity of firms on the market will depend to a large extent on their timely decision to be part of this change.
4. Higher employee motivation and trust
A company’s success on its journey to sustainability is primarily driven by its employees. If a firm gives its employees space to develop their talent, fulfil their dreams, and supports sustainable activities outside of its business area, it will become attractive to the best talent in its field. By giving its employees time and space for social responsibility initiatives (e.g. volunteering, education on diversity and inclusion, wellbeing activities), a company can build and maintain their loyalty, engagement, and pride in their employer.
According to PwC’s Global Workforce Hopes and Fears Survey 2022, employees require higher support and communication from their employers on how to incorporate ESG aspects into their work.
5. Compliance with legislation and reporting obligations
Whether a company decides to take the path of social responsibility is no longer a matter for a company alone. The EU’s ESG legislation (EU Taxonomy Regulation, Non-Financial Reporting Directive (NFRD), and the Corporate Sustainability Reporting Directive (CSRD)) introduces specific obligations for companies to report information on sustainability, including the social sphere.
Click here to read about regulatory compliance.
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