Corporate social responsibility (CSR) has certainly become part of the mainstream. Businesses across industries have made increasing investments in support of their ESG goals, and there’s been widespread backlash against companies who haven’t demonstrated a commitment to stakeholders beyond shareholders. Even still, given the limited resources of a startup, it’s difficult to know whether or not an investment in CSR is worthwhile. This is especially true during challenging fundraising times, which is true of the current day. In this post, I’ll share five reasons why startups should invest in their CSR strategies, as many of these investments bolster strong long-term value.
Reason 1: Attract and retain great talent
Employees are looking beyond paychecks and benefits when analyzing a company for employment. 93% of private sector employees believe companies must lead with purpose, and nearly 70% would not work for a company without a strong values-driven mission. Additionally, nearly 60% of employees say they would take a pay cut to work for a purpose-driven company. A commitment to CSR also helps to retain talent - 90% of workers at purpose-driven companies report being more inspired, motivated, and loyal to their workplace.
Reason 2: Grow and maintain a robust customer base
In many ways, consumers are leading the charge in supporting companies with strong CSR focuses. Customers are more likely to buy from and remain loyal to companies that demonstrate a commitment to a greater purpose than just profits. 77% of customers are motivated to purchase from companies that are committed to making the world a better place. 54% of consumers say they have stopped purchasing from a company due to its public position on an issue. Therefore, companies are being increasingly pressured to take a stance on issues of importance to its wider stakeholder bases.
Reason 3: Build a strong brand reputation and differentiate
Advances in technology have made product offerings increasingly similar across companies. Therefore, it’s become more and more difficult for companies to differentiate from their competition. One method to stand out from the rest would be through a commitment to a particular purpose or mission. As mentioned previously, both customers and potential employees assign value to companies that focus on purpose, so investment in CSR can only help to separate companies from their industry peers.
Reason 4: Improve financial performance
Rather than being seen as a cost, an investment in CSR should be seen as a long-term play to increase profits. 70% of U.S. CEOs found that their investments in ESG have improved their companies’ financial performances. Project ROI, a joint analysis between IO Sustainability and Babson College of over 200 studies, details the potential financial gains of companies that commit to CSR. Companies can stand to gain about 6% in market value over a 15-year period, reduce share price volatility by 2-10%, and reduce market risk by 4%. Overall, the financial implications of committing to CSR are significant.
Reason 5: Attract investors
Startups should also consider the impact of CSR on potential future investors. 73% of investors state that efforts to improve the environment and society contribute to their investment decision. Additionally, 41% of millennial investors put effort into understanding a company’s CSR practices (up from 27% of Gen X and 16% of baby boomers), illuminating the fact that interest among investors in CSR will only grow in the future. In order to maximize investments, startups should hone in on their purpose beyond profits.
Overall, it’s clear that the private sector is moving towards greater transparency of the wider impact companies have on their stakeholders. In order to remain competitive and survive in the long-term, startups must commit resources to building out their CSR strategies. Rise Together Ventures can help to support startups on their CSR journeys, helping them to clarify their unique promise to society and provide value to the community writ large.
Georgia Hoagland
