With consumer confidence at a new low and businesses running scared, how will the global recession affect corporate social responsibility?
With the economy officially in recession, consumer confidence at a new low, and the Dow Jones Industry Average hovering around 8000, companies are looking for ways to cut costs and increase their bottom line -- and in some cases simply survive. So how will these market forces affect corporate social responsibility programs? Is CSR just a luxury items on a company's balance sheet that can be cut along with headcount? And with consumers focused on pinching pennies, how will consumers react to corporations dropping their sustainable initiatives?
Expert opinion differs on how threats in the marketplace will impact consumer spending-on green products and services and on companies' ability to compete. But as argued below, there's reason to believe corporate social and environmental responsibility will remain unharmed and possibly even increase during the economic downturn.
First, a large percent of the 21st century consumer finds "green" companies to be more appealing and prefers to shop from them. A study conducted by Penn, Schoen & Berland Associates found 80-percent of consumers "believe it is important to buy from green companies, and most responded that they would spend more on green products" For more details on the study see InformationWeek. With the increasing concern about global warming, consumers are awakening to the "green product."
Currently, companies competing to get ahead and capture this growing niche in the market are exploring new innovative ways to beef-up their sustainability practices including how to market their product lines. Recently, the Wall Street Journal ran an article on carbon labeling in the consumer goods market. It was entitled "Six Products, Six Carbon Footprints." Carbon labeling is the new Fair Trade, but it can be applied to all products not just those sourced from abroad.
In my opinion, companies that begin to adopt carbon labeling as a policy for their products now will be ahead of the game once it starts to become the norm, which it will if we are serious about the climate crisis. Being on the forefront of sustainable practices has the potential to give companies a competitive edge. A subset of consumers are looking for companies that are environmentally responsible and they are willing to pay a little extra for their products, even in a down economy.
Second, a company's reputation would be damaged if it backed out of a long-term environmental strategy. A survey conducted by A.T. Kearney and the Institute for Supply Management looked at Fortune 100 companies from multiple industries and their sustainability practices. The studies concluded that 60 percent of the organizations incorporated sustainability practices into their strategies and 50 percent changed suppliers for not upholding sustainable principles (For more details on the study see A.T. Kearney's website).
These practices are not short-term strategies. In addition, sustainability reports or GRI (Global Reporting Initiative) reports are being adopted by companies in many industries, including electronics. There's a good chance that shareholders and customers would penalize a company that did not produce an annual sustainability report and were not matching their competitors practices.
Third, and perhaps most important, incorporating sustainable practices doesn't have to involve a huge cost. In the long run, companies are seeking ways to cut costs and hedge against volatility in the market. Energy efficiency, waste reduction programs, and a variety of other initiatives reduce inefficiencies, save money and boost the bottom line. Therefore, it is in a company's best interest to maintain a long-term commitment to these programs and continue to invest in them through the economic downturn.
All-in-all, the downturn in the marketplace shouldn't have a major impact on sustainable practices within firms. Consumers continue to demand 'greener' products at an increasing rate. With a strong demand for these products, businesses will not abandon their efforts due to the economy. Sustainable practices shouldn't be viewed as an additional cost to a firm but as a way to differentiate themselves and save money from increased efficiency all while reducing their impact on the environment.
About the author: Owen Glubiak lives and works in Burlington, Vermont. You can reach him at email@example.com.