Magazine article Strategic Finance

Consumers Consider the Importance of Corporate Social Responsibility

Magazine article Strategic Finance

Consumers Consider the Importance of Corporate Social Responsibility

Article excerpt

The corporate social responsibility (CSR) factors that American consumers believe are most important differ from those that socially responsible investors (SRI) use. Although its members are far from united in their appraisal methods, the SRI movement embraces a wide spectrum of evaluation characteristics. Prominent investment research firm KLD Research & Analytics, Inc. created Socrates[TM], an online social research database that provides measures of company performance designed to help investment professionals integrate environmental, social, and governance factors into their decisions.

For seven years, Business Ethics magazine has used Socrates[TM] data to define its 100 Best Corporate Citizens list. Firms are ranked on performance in eight stakeholder categories: shareholders, community, governance, diversity, employees, environment, human rights, and product.

The disparate CSR perspective held by consumers was developed through research sponsored by the National Consumers League. A telephone survey of 800 U.S. adults showed that the most important proof of good corporate citizenship is how well a company treats its employees. Similarly, the survey found that 76% believe that a company's treatment of its employees plays a big role in consumer purchasing decisions.

The most common responses consumers give to what corporate social responsibility means are: "corporations need to be committed to their employees" (27%), "corporations need to be committed to the public and communities and overall society" (23%), "corporations have a responsibility to provide quality products" (16%), and "responsibility to the environment" (12%).

American consumers also feel strongly about buying products from or working for a company whose values are aligned with their own personal values. Survey respondents say that it's "extremely" or "very" important to work for (79%), buy products from (65%), and socialize with (72%) those who have similar values and principles.

Major employee-related issues cited by consumers include:

* The importance to pay workers inside/outside the U.S. a living wage,

* Salary/wage increases should be placed ahead of making charitable contributions,

* Businesses should employ more people rather than make charitable contributions,

* How well a company treats employees influences what they buy,

* Risks to employee safety influences what they buy, and

* Desire to work for a company that shares similar values and principles.

In contrast to the high importance consumers give to social responsibility, the survey found that only 21% of respondents give U.S. corporations top marks for being socially responsible. When asked whether companies have improved in their social responsibility during the last two or three years, only 30% believe that companies are doing a "somewhat better" or "a lot better" job of being socially responsible.

When asked how they obtain information to form their judgments about the social responsibility of a company, 47% of respondents indicate that they use the Internet. Americans believe the most credible means to shape their opinion of corporate social responsibility is their own online research. Consumers rely on the Internet and word-of-mouth sources because they prefer an unfiltered, unedited view of news and information. Because of the increased availability of online resources, 58% of the respondents believe they or people like them are more informed about companies' records for social responsibility than they were just a few years ago.

The survey also found a positive relationship between active Internet use and engagement in social responsibility. About 40% of those using the Internet have sent e-mail messages to a company about its products or services, and 41% have sent a message to an elected state or federal official about an issue. According to Paul Argenti, professor of corporate communication at Dartmouth's Tuck School of Business, "The American public continues to refine its definition of corporate social responsibility and gain empowerment through online resources in their new role as activists for social change. …

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