A responsible company attracts customers, job applicants, investors and partners.
For a company, responsibility lays down the conditions for a long-term existence. This is how Sirpa Juutinen, Corporate Responsibility Expert at PwC, summarises the importance of responsibility.
Studies show that acting responsibly brings profits for the company, but how does responsibility look from the perspective of employees, investors and partners? To answer this, we examined five statements about responsibility.
According to Sirpa Juutinen, Corporate Responsibility Expert at PwC, consumers demand that corporations act responsibly.
1. Responsibility increases profits
International studies show that of all stock-exchange listed companies, the ones that place corporate responsible at the centre of their strategy are more successful than other companies. Therefore, corporate responsibility brings profits, but only if certain requirements are met: Corporate responsibility must be an inseparable part of corporate strategy and product development.
“Positive results can only be achieved if the corporate responsibility actions focus on factors that are essential for the company’s business. Concentrating on non-essential factors incurs costs, but yields very little benefits,” emphasises Sirpa Juutinen.
Introducing corporate responsibility at the core of strategy often attracts customers that are more willing to make a purchase. This in turn saves costs, as resources are utilised better. Additionally, responsibility supports risk management and the corporate brand.
“At best, developing responsible business expands the product range of the company and brings entirely new business opportunities,” states Alma Media’s Corporate Responsibility Manager Kirsi Hantula.
2. Consumers appreciate responsibility
The IPCC climate report published in early October caused many people to re-think their own consumption patters. Juutinen states that younger consumers in particular require companies to demonstrate responsibility for the climate, but also respect human rights, supply chain transparency and humane working conditions.
According to Hantula, the consumer identity has changed, at least in affluent Western countries. Continuous purchasing and consumption of products no longer gives the same satisfaction as it used to do. Now, many consumers want to identify with brands
that offer a more responsible and sustainable way of expressing one’s identity.
“These consumers wish to be a part of a larger, more community-oriented story. This opens up new opportunities for responsible, innovative companies. They are able to meet the demanding consumers’ needs by offering long-lasting, sustainably produced products and services that enable the consumers to feel that their consumption choices have a positive effect,” says Hantula.
3. Responsibility supports both the internal and external employer image
An increasing number of employees want to work in a company or organisation whose operations they perceive as meaningful. A meaningful job increases commitment, sometimes to a greater extent than the salary.
“Employees want to be proud of their employer,” says Juutinen.
The employees perceive their job as more meaningful if their employer operates in ways consistent with corporate values and assumes an active role as a responsible member of society. For millennials and younger generations, corporate responsibility is the most important factor when selecting a job.
“In a situation where certain expertise is highly desired on the job market, corporate responsibility might be a critical asset for a company in attracting the best experts and having them commit to the company for a long time,” says Hantula.
4. Investors favour responsible companies
Investors have taken corporate responsibility into account in their decisions for a long time, although investors vary in which kinds of responsible actions they consider important, according to Juutinen. Nevertheless, it can be said that responsible investing is becoming mainstream.
“From the investor’s perspective, investing in companies that operate responsibly and sustainably is sensible, since long-term development of responsibility improves a company’s risk management and risk forecasting and increases the company’s profitability,” concludes Hantula.
The drivers of this change are not only institutional investors who often require in-depth data on corporate responsibility as support for investment decisions, but also the upcoming EU legislation.
“The ongoing work to create sustainable financing will create common regulations for investing and financing in the EU. These regulations will also spur investors towards responsible investing,” says Juutinen.
5. Responsibly operating companies attract the best partners
Modern consumers want to know the origin and manufacturing conditions of a product. Consumers also pay attention to a company’s business partners and the type of retailers receiving the company’s products for sale.
“Customers might be very quick to draw conclusions, especially when an equivalent product or service is available,” says Juutinen.
Therefore, responsibility plays a key role when supply chains and partners are assessed from a risk management perspective. At the same time, responsible operations also attract the very best partners. It is easy to work with partners that share the same values.
“For some companies, responsibility has become an essential part of their brand. From veterans like the US company Patagonia to small new Finnish fashion brands, the companies that swear by corporate responsibility also develop their responsibility systematically. Their actions speak for themselves so clearly that it creates a great story for the company. Who wouldn’t want to be a part of it?,” asks Hantula.