Social Responsibility, by definition, is the concept that a business can be both profitable AND contribute to the greater good. But can social responsibility also benefit a business at the same time?
Absolutely! And it should. (If you aren't sure you agree with this, check out another of my blogs “Social Responsibility in Small Business – What's Holding You Back?“)
But unfortunately, I don't get asked this very often. Because, more often than not, Small Business Owners don't take the time to connect how their social responsibility efforts can also benefit their business.
Countless published articles and research studies describe the potential benefits of social responsibility, primarily for corporations or large businesses, but the benefits also apply to small businesses.
So you don't have to sort through all the research, I've compiled and grouped the potential benefits into four overall categories:
- Increase Brand Awareness
- Improve Employee Relationships
- Improve Customer Relationships
- Improve Finances
Potential benefits in each of these categories are described below.
Increase Brand Awareness
Do you want to improve brand awareness for your Small Business? Before continuing, let's ensure we are speaking the same language. For the context of this article, I'm using the Oxford dictionary definition of brand awareness as the “extent to which consumers are familiar with the distinctive qualities or image of a particular brand of goods or services.” It also helps build trust and credibility in your business, which impacts sales.
It's often said that no idea is ever new and that no business is ever unique. However, it is essential to distinguish your business from similar companies and to speak to and attract your target audience (which may differ slightly from a business that looks the same).
To read more about the importance of brand awareness and how to establish, boost, and measure it, I recommend an article from HubSpot – The Ultimate Guide to Brand Awareness. Unfortunately, only one single social responsibility action is included.
Embracing social responsibility (doing more social good through your business) can help improve brand awareness in the following four ways (each described in more detail):
- Enhance your reputation.
- Stand out in a crowd (and be different from your competitors).
- Reach new markets.
- Increase earned media opportunities.
1. Enhance Your Reputation
Your customers aren't just buying your products and services. With their purchases, they are also supporting your company and brand. Therefore, your overall business reputation or HOW the public thinks of your business is crucial in their decision-making process.
Socially responsible actions, such as giving back to the community and being a sustainably focused business, can enhance your reputation. However, these only work if you COMMUNICATE about your actions! You want the public to think positively about what you do. Particularly if your actions also connect to aspects they are passionate about (i.e., it's important to KNOW your audience).
Not only is this a philosophically sound recommendation, but it has also been proven. For example, 35% of Corporate Executives reported success in enhancing their reputation when corporate citizenship was integrated into their business strategy (Boston College Center for Corporate Citizenship).
2. Stand Out in a Crowd
The extent to which your customers are familiar with your brand is another crucial element of brand awareness. However, with the vast quantity of content consumers consume at events, online, and on social media, it is easy to get lost in the notice, especially if you have a lot of competition in your market.
Social Responsibility actions that will help you stand out in a crowd include:
- Providing alternative content for social media and email newsletters – if you only post about your products and services, your followers may tune out. To expand your content, share your social responsibility actions through your social media channels and emails. And better yet, encourage your followers to participate in your efforts and share your news.
- Taking unique and memorable actions – evaluate your competitors. How are they contributing to the greater good? Do something DIFFERENT. AND COMMUNICATE about it. I'm willing to bet they aren't communicating their efforts much, if at all.
- Involving your customers – when possible, involve your customers in your social responsibility actions. Is your company volunteering? Invite your customers to join. Are you doing a blood drive in your office? Invite your customers to sign up for slots. Are you doing a coat drive for the homeless? Invite your customers to bring in coats. Not only will this help their engagement with your brand, but it will also make you unique from your competitors.
- Sponsoring events – if you pick events that match your business values and attract your target audience, sponsorship opportunities can provide a great way to bring attention to your brand. Look for sponsorship options that include the sponsor name in advertising, display the sponsor name in prominent areas where the audience can't miss it, offer opportunities to be present at the event and engage with potential customers, and allow branded items to be given to the guests.
- Donating items – donate items or services for auctions attended by your ideal client where you can display information or an example, provide business cards or marketing material, and gain at least one new client as a result of the donation.
3. Reach New Markets
When expanding your business to a new market, it can be hard to get your name out, especially in saturated markets.
Being able to distinguish yourself and reach potential consumers quickly will significantly help your efforts. Social Responsibility can help you reach new markets in the same way as standing out in a crowd. However, you apply the same ideas to the NEW market, the NEW customers, and the NEW opportunities.
You may also want to use Social Responsibility efforts to collaborate with non-competitive businesses already in your new target market. One of the best ways to do this is to plan a combined socially motivated activity that is socially responsible! It helps contribute to the greater good AND brings awareness to your brand. It's also much easier to propose a mutually beneficial collaboration than something potentially perceived as a favor.
4. Increase Earned Media Opportunities and Odds
Earned media is publicity or exposure for your business that you don't pay for, aka paid media, or you don't create and control (aka owned media). It's invaluable to a brand, as consumers are more likely to trust earned media than paid or owned media.
Social responsibility can help give you more opportunities or increase your odds of securing earned media by providing compelling public-interest stories that stand out from other pitches.
Improve Employee Relationships
Hiring and keeping employees is a critical component of running a Small Business. Social Responsibility can help improve your employee relationships in the following five ways (each described in more detail):
- Meet employee expectations.
- Increase employee engagement.
- Increase employee happiness.
- Increase employee wellness.
- Improve employee skills.
1. Meet Employee Expectations
Employees now EXPECT employers to not only have a successful business, but they also expect their employer to contribute to the greater good (as proved by countless studies in the last few years).
- 86% of employees believe it is “important” that their employer is responsible to society and the environment, with over half of workers (55%) believing that it is “very important” (Project ROI).
- 77% of newly hired employees and 76% of existing employers expect companies are more purpose-driven (a higher percentage than any other stakeholders, including customers at 68%) (Covestro).
- 86% of business executives believe that top talent is significantly more inclined to work for companies with social responsibility efforts (commitment to social, environmental, and sustainability issues) (Covestro).
- 86% of employers have reported that their employees expect them to provide opportunities to engage in the community (America Charities).
Over time, more and more employees will expect an employer to be socially responsible as the workforce transitions to more Millennial and Generation Z employees (who place more importance on Social Responsibility than Gen X and Boomers). These employee expectations are important considerations when recruiting new employees (discussed more in later sections) and retaining existing employees.
2. Increase Employee Engagement
Employee engagement is the emotional connection that an employee feels towards their employer. Similar to consumer engagement, it is how your employees FEEL about your business. Unfortunately, a Gallup study found that only 33% of Americans consider themselves engaged at work; in other words, only 1 in 3 of your employees really care about your company.
Specific efforts that will increase your employee engagement include:
- Communicating your business purpose with your employees (particularly how it connects to the community) – 72% of Gen Z and Millennials, 59% of Gen X, and 58% of Boomers find purpose at work when they see how the company benefits the community (MetLife Study). When an employee finds purpose at work, they are significantly more engaged.
- Involving employees in Social Responsibility actions (such as modifying the office for environmental efforts or volunteering in the community) – 68% of executives believe employees would be more engaged AND productive at work if given the opportunity to participate in purpose-driven projects (Covestro I3 Index).
- Offering volunteer opportunities to employees – There is a 19% increase in the number of employees who feel loyal to their company when they participate in company volunteer activities (Deloitte).
When a company embraces Social Responsibility, the overall employee engagement increases by 7.5% (Project ROI), meaning employees are more connected to the business.
When you have highly engaged employees, you may also be helping your business by:
- Reducing absenteeism (by 41%)
- Reducing employee turnover (by 24%)
- Reducing safety incidents (by 70%)
- Increasing productivity (by 17%)
- Increasing sales (by 20%)
- Increasing profitability (by 21%)
3. Increase Employee Happiness
We have all worked with unhappy colleagues and likely had a disgruntled employee.
It is emotionally exhausting. Not only is an unhappy employee less productive, but they can also negatively affect the productivity of other employees. The longer the person is unhappy, the further the impacts spread.
As a reminder, actions that improve the safety of your work environment and the overall mental and physical well-being of your employees and customers are one of the categories of social responsibility efforts (Safety, Health & Wellness).
These actions can also contribute indirectly to a happier employee, including, but not limited to, some of the following actions:
- Installing art in the workplace.
- Encouraging employees to personalize their workspace.
- Offering wellness benefits.
- Offering flexible work schedules.
- Offering work-from-home opportunities
Happier employees will benefit your business by:
- Increasing productivity – When employees are happy, 39% will work harder and increase their productivity (One4All study).
- Decreasing absenteeism – happier people are generally healthier people and less likely to skip out on work (Harvard study).
4. Increase Employee Wellness
Many of the potential actions in the Safety, Health, and Wellness category also focus on improving your employees' mental and physical well-being.
Improving your employee wellness can directly benefit your business by:
- Increasing employee engagement – 88% of employees who consider themselves to have high well-being also consider themselves engaged at work (as opposed to only 50% of employees with low well-being) (Limeade/Quantum Workplace).
- Increasing employee productivity – 66% of employers offering wellness programs reported increased productivity (International Foundation of Employee Benefit Plans).
- Decreasing absenteeism and health costs – detail? (American Journal of Health Promotion).
5. Improve Employee Skills
Finally, a less common and unexpected opportunity to improve employee relationships is offering options to enhance their skills through volunteer activities. A study by Deloitte confirms employees can broaden overall professional skill sets and strengthen leadership skills through volunteering.
Consider your employees and any skills they may lack, and find volunteer opportunities that may help strengthen those skills. It's a double-win – great for your employees AND giving back to the community.
Improve Customer Relationships
If you want to grow your business, maximizing sales from your existing customers is significantly “easier” and more cost-effective than finding new clients.
Social responsibility can benefit your business in the following four ways (each described in more detail):
- Meeting customer expectations.
- Increasing customer engagement.
- Improving customer retention.
- Providing new opportunities to interact with customers.
1. Meet Customer Expectations
Like employee expectations, studies have also shown that customers pay attention to why and how companies do business. And for some consumers, it's no longer enough to provide good products or services; businesses must also demonstrate how they also “do good.”
For example, a 2017 CRS study by Cone Communications found that:
- 95% of American consumers consider it important to be a good employer.
- 90% of American consumers consider it important to operate in a way that protects and benefits society and the environment.
- 89% of American consumers consider it important to create products, services, or programs to ensure the well-being of the consumers and their families.
- 87% of American consumers consider it important to invest in causes in my community and around the globe.
- 78% of American consumers consider it important to support social justice efforts.
As consumers continue to pay attention to social responsibility and access to information on the internet grows, consumers are also taking the time to research company information in advance. For example, 39% of Americans report they have researched a company's business practices or support of social or environmental issues before purchasing.
By sharing your social responsibility efforts in your store/business location, on your website, through your social media, and in email communications, you are connecting your business to customers' growing expectations and removing the need for customers to research on their own.
2. Increase Customer Engagement
Customer engagement is the emotional connection between a business or brand and its customers. It is how you make your customers “FEEL” as a business or brand.
Studies have shown that socially responsible actions help to increase loyalty, positive image, trust, and customer satisfaction (all of which contribute to a more engaged customer):
- 88% of Americans would be more loyal to the company when they support a social or environmental issue (Cone Communications).
- 92% of Americans have a more positive image of a company when they support a social or environmental issue (Cone Communications)
- 87% of Americans would be more likely to trust a company when they support a social or environmental issue (Cone Communications).
- Social responsibility efforts can increase customer satisfaction by 10% or more (Project ROI).
By helping to increase customer engagement, you are also helping to:
- Increase your odds of making sales – the chance of selling to an existing customer (particularly an ENGAGED customer) is 60-70%, while the chance of selling to a new prospect is only 5-20%(Marketing Metrics); and,
- Increase your revenue – customers who describe themselves as fully engaged are likely to generate 23% more revenue than average customers (Gallup).
2. Improve Customer Retention
Customer retention is a strategy to maintain a customer's interest and spending. On average, 65% of a company's profits come from existing customers. Therefore, maintaining a longer relationship, i.e., increasing customer retention, can increase sales. In addition, long-term customers are familiar with your products or services and may be more likely to purchase high-priced offerings.
The more engaged the customer, the longer they typically remain a customer. The longer they remain a customer, the more likely they will continue buying your products and services.
Statistics show that when businesses embrace corporate citizenship (another name for social responsibility), there is a 30% increase in the success of improving customer retention (State of Corporate Citizenship 2017).
3. Provide New Opportunities to Interact with Customers
Sharing social responsibility information or involving customers in social responsibility efforts provides an alternative way to attract customers to your brick-and-mortar location or website. Plus, it offers an alternative conversation via email and social media to take a break from direct sales or promotions.
Many studies have documented that:
- If given the opportunity, 74% of customers would volunteer for a cause supported by a company they trust (Cone Communications)
- If given the opportunity, 64% of customers would express an opinion about a company's social responsibility efforts online via the website, blog, or product reviews (Cone Communications).
- Involving customers directly in social responsibility activities increases their trust in a company while decreasing their trust in competitors (Project ROI).
All of which lead back to increased engagement and improved retention.
Improving finances is rarely a driving purpose for embracing social responsibility, but there are four potential related benefits to keep in mind (each described in more detail):
- Decrease marketing costs (by attracting new customers).
- Reduce operations costs (beyond marketing costs).
- Increase profits.
- Obtain tax benefits.
1. Decrease Marketing Costs (by Attracting New Customers)
Marketing and advertising are significant operating costs for most small businesses and may range from 1% to 8% of their revenue (SBA blog). However, no matter how much you spend, finding new clients with less effort is one of the easiest ways to decrease your marketing costs and contribute to your bottom line.
Social Responsibility can help attract new clients by:
- Word of mouth (let your existing customers market for you) – 81% of American consumers would tell their friends and family about a company's CSR efforts (Cone Communications)
- New exposure – attending or sponsoring community events can bring more attention to your business and attract new customers. However, choose the RIGHT community events that match your values and attract your target audience. Otherwise, you won't see much benefit.
You can ALSO leverage your existing customers to help attract new customers if you:
- Invite them to attend community events and bring a friend.
- Invite them to participate in any volunteer activities and to bring a friend
- Ask for referrals. If you have highly engaged customers, take a moment and ASK them to refer others. Consider providing rewards for referrals. And what if those rewards were socially responsible as well? SO MUCH CAN BE CONNECTED!
Not only is this good in theory, but according to the Boston College Center for Corporate Citizenship, “10% of Corporate Executives saw an increase in the success of attracting new customers when corporate citizenship (another word for social responsibility) was integrated into their business strategy”.
2. Reduce Operations Costs (beyond Marketing)
Marketing is just one element of the overall operating cost of a business. The result of socially responsible actions can also decrease aspects of your operating costs.
These impacts can be subjective and may differ for each business, as increased costs may also be associated with some actions. Therefore, it's essential to consider and review each specific action relative to your unique business operations to determine the potential financial benefits.
Some examples include:
- Reduced energy as a result of energy efficiency changes (although there also may be increased equipment costs)
- More efficient use of raw materials and packaging as a result of evaluating and reducing the waste produced from your operations (therefore decreasing raw material costs)
- Reduced employee costs as a result of wellness activities (and less health care costs)
- Reduce turnover costs as a result of happier and more engaged employees
3. Increase Profits
Social responsibility efforts can also help increase your profits. But, as with most financial benefits, the benefits aren't as easy to define.
Some examples include:
- Selling at a higher price point for green or sustainable products – In some cases, particularly for Millennials, consumers may pay more for sustainable or green products. However, there are a lot of factors to consider, as often it's more expensive to make sustainable or green products, and you have to be careful not to price too high (Neilsen).
- Increasing your employee productivity, therefore, producing more goods or offering more services
- Increasing sales to existing clients.
4. Obtain Tax Benefits
There may be tax benefits due to your socially responsible actions, particularly in efforts to go green or reduce energy use. I recommend you keep your Certified Financial Planner informed of any actions to determine if there may be associated tax benefits.
Connecting Efforts to Benefits
Understanding HOW social responsibility can benefit your business is only part of the equation. You need to know how to connect these benefits to your actions and then implement them most effectively to maximize your efforts.
To learn a unique approach to making your social responsibility effective, check out the Small Actions Framework.
About This Content
This article is part 4 of an 8-part series that introduces foundational concepts about Small Business Social Responsibility, Small Actions Greater Good, and the Small Actions Framework. Links to these articles are provided below.
- What is Small Business Social Responsibility?
- What is the Small Actions Framework? (A Unique Social Responsibility Approach for Small Businesses)
- How Can You Do Good as a Small Business? (Categories of Social Responsibility)
- Why Should Businesses Be Socially Responsible? (Or More Specifically Small Businesses)
- (This Article) What Are the Potential Benefits of Social Responsibility?
- What’s Holding You Back? (Social Responsibility in Small Business)
- Doing Good is Good Business (IF You Do It Effectively)
- Levels of Social Responsibility (How Socially Responsible is Your Small Business?)
As an alternative to reading each of the blogs separately, you sign up for a free 8-part email series, An Introduction to Social Responsibility for Small Business Owners, which includes most of the content from these 8 blogs.