Especially smaller, family-run companies often feel an obligation to contribute to sustainable economic practices; they are guided by an approach that is very much in line with that of the “honourable merchant”. Many business owners feel that it is their responsibility to give back to and to make a positive impact on society, their staff and the environment. They see corporate responsibility as a normative, moral obligation.
CSR and business success
But CSR is about more than moral or ethical questions. CSR is a determining factor in a company's business success. The notion that the economy and the environment or running a business and social responsibility are antithetical to each other, and that CSR is therefore a luxury not everybody can afford, is outdated. Modern management theories are premised on the opposite idea: Sustainably run companies are often more successful in the long-term. There are many reasons for this:
- Reputation: Being perceived as a responsible company helps businesses position themselves as attractive employers in times of ever greater shortages of skilled labour; it boosts customer loyalty or helps with tapping new groups of customers.
- Efficiency: Energy and resource efficiency reduce not just a company's ecological footprint but also its costs.
- Risk minimisation: When a company's occupational safety and health management is in good shape, costs are lower. There are fewer accident-related interruptions of production and workers miss fewer working days.
- Innovation: Companies which adapt to a changing environment early on, for example to higher energy costs, a scarcer supply of commodities and stricter regulation, will gain a competitive edge.
CSR and capital markets
A crucial incentive for publicly-listed companies is that CSR is a relevant factor for capital markets. Especially investors with a long-term strategy often prefer to invest in companies with more sustainable business practices than the competition. Institutional investors such as life insurers and pension funds view sustainability strategies as crucial factors in their investment strategies.
However, investors' sustainability criteria and their investment strategies differ markedly: Some rule out investments in certain businesses (e.g. investments in tobacco, pornography, arms, nuclear power), while others have a strategy of investing in an industry's most sustainable businesses (best-in-class approach), while still others only invest in certain sectors or business models such as renewables or environmental technology.
Over the past few years, sustainable, responsible and impact investing (SRI), has become an important driver for the CSR activities of many companies. According to estimates by the US Forum for Sustainable and Responsible Investment (USSIF), one in every three dollars invested in the US in 2020 followed the criteria of SRI. Information from the Global Sustainable Investment Alliance (GSI Alliance) shows that in 2020 global sustainable investment reached more than 35,3 trillion US dollars. That corresponds to a rise of 55 percent since 2016.