The previously mentioned UBS Equity Research study notes that if a firm or
an industry externalizes costs, the price is normally notnegotiated at the
time. Instead, the price may be renegotiated at a future date, and sometimes
in a court of law. In other words, you can pay a fixed cost now for CSR or
gamble on paying an unknown cost later — one that may be determined by
trial lawyers and 12 angry men and women.
CSR protects your brand image........................................................
The reputation of the brand is one of the most valuable assets of any company.
Corporations now operate in a globally networked world where information
spreads within minutes. An environmental or social problem in a small village
halfway around the world can influence the attitude of customers at the local
Toys R Us. A hard-earned reputation can be damaged or destroyed in a day.
Corporations now come under great scrutiny from third-party groups. These
may include environmental groups, human rights organizations, scientific
alliances, and so on. The public is often biased more favorably towards these
groups than corporations. In fact, the public can be downright skeptical
towards big business. When an NGO gets into a dispute with a corporation,
the burden of proof usually falls to the corporation.
CSR is a means to protect brand image. It shows the world you want to be a
responsible citizen. When problems do arise, it shows you will correct them
quickly and decisively and own up to your mistakes.
Transparency has become a powerful brand differentiator and marketing
tactic. British food retailer Marks & Spencer launched a major campaign
called “look behind the label” to tell customers about how its products are
sourced and made. For example, a package of crackers might list its environ-
mental footprint, with CO2 emissions, along with nutritional information.
Such proactive tactics have generated many positive news items, according
to an analysis by the Geneva-based ethical reputation research firm
Covalence.
Two-thirds of chief financial officers at leading U.S. retailers say their com-
pany is actively involved with “green” or environmentally friendly practices,
according to a new study by BDO Seidman, LLP. Among the 100 largest retail-
ers, 83 percent are involved in green practices and 62 percent have increased
their green investments during the past two years. When asked to identify
the greatest motivator for this change, two-thirds of the CFOs cited the com-
pany’s corporate image among consumers and shareholders. Tax breaks or
tax incentives were only cited by 15 percent of the CFOs. In other words,
brand image proved a much greater motivator than government policy.