Christian Arno

Why scaling down CSR initiatives during an economic downturn is a mistake

9 min Read
Wooden axe lodged in a tree stump in a snowy field surrounded by mountains

During times of recession, some may look at CSR as an unaffordable luxury. It absolutely is not. Studies show that CSR activities can actually increase brand value and improve performance, even during an economic downturn.

Ultimately, actions that businesses take today will impact how investors, customers and employees view them in the future. Implementing a strong CSR policy is thus a vital step in futureproofing your business—protecting it from potential economic turbulence, but also making sure it's on the right side of history.

Let’s deep dive into three reasons why scaling down CSR initiatives during economic downturns is a mistake:

1. Investors won’t invest

When Larry Fink told stakeholders that purpose and profit are inextricably linked, it demonstrated just how seriously CSR is being taken at board level.

In a recent survey, Harvard Buiness Review interviewed 70 senior executives at 43 global investment firms, including the world’s three biggest asset managers (BlackRock, Vanguard, and State Street). What did they find? 'ESG was almost universally top of mind for these executives,' reported the survey's authors.

Slacking on CSR initiatives is no longer an option for organisations that rely on shareholder support. For one, climate change is a systematic risk which investment houses are unable to diversify their portfolios away from; it’s become too big to mitigate against. Furthermore, there’s now $21.4 trillion invested sustainably in global assets, with $13 trillion of this in Europe alone (HSBC). As these numbers rise, so does the importance of having—and sticking to—environmental targets.

But the importance of CSR isn’t only relevant to businesses reliant on investment. In 2020, Tesco demonstrated this by announcing its new £2.5bn revolving credit facility which links interest rates with environmental targets; if the company delivers on them, they benefit from a lower interest rate loan margin. Aligning corporate financial strategy to sustainability commitments is an approach we’re only going to see more of as the green revolution takes off. The way I see it, businesses that choose to drop or neglect their CSR will effectively be swimming upstream.

2. Customers won’t buy

In a world where customers have more choice than ever, studies have shown that people are more driven than ever to vote for change with their purchases. According to a report from GlobalWebIndex, 68% of online customers in the UK and the US might not use a brand if they have poor or misleading CSR. Close to 85% said they would or might stop buying from a brand with a poor environmental track record.

Similarly, a recent global study by Zeno Group showed that customers were four to six times more likely to trust, buy and champion companies that they felt demonstrated a strong sense of purpose. The study also indicated that customers were six times more likely to protect that brand during a challenging moment, which suggests that CSR is key to retaining customers during periods of difficulty.

The Zeno Group study also reported that 76% of polled customers 'have taken an action in response to a brand doing something they disagreed with'. In today’s climate, backing down from yesterday’s promises could have serious implications.

On the other hand, a 2020 study by the European Journal of Marketing revealed that 'CSR initiatives during recessions are actually associated with increased perceptions of brand value.' Clearly maintaining—or even strengthening—CSR initiatives during periods of economic downturn can do much to sustain customer loyalty and improve top-line growth.

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3. Talent won’t stay

I don’t know about you, but when I read that one in four workers were willing to take a pay cut to work for an environmentally-friendly company, I was both inspired and (I must admit) a little shocked.

If a business ever needed more proof of the value of CSR, surely this is it. According to the survey by Totaljobs, employees are (on average) willing to be paid £8000 less to work for a company that aligns with their environmental values. This trend, known as a ‘Green Cut’, demonstrates just how serious talent is about protecting the planet.

Scaling down or pausing CSR initiatives might save money in the short-term, but is that really worth losing, or losing out on, top talent and the benefits they bring to your firm’s long-term growth?

What to focus on

For businesses looking to implement or build on environmental objectives, consider where you’re able to best make a difference. IKEA, for example, has dedicated a large portion of its efforts to making cotton farming more sustainable, since cotton is one of its most used materials. Creating change within your remit is powerful because it’s where you hold the biggest potential for change.

Proactively engaging with your environmental objectives sends a strong message to employees, customers and investors that you’re dedicated to achieving your goals. On the other hand, waiting until shareholders and stakeholders prompt you could damage those relationships.

If you’re looking to expand or create new initiatives, one area you can definitely make a difference is through employee education and engagement. Building a company culture that encourages green behaviour won’t only reduce your business’s carbon footprint, it will also ripple out to the wider world (and make you an attractive employer in the process).

It's never been more clear that for businesses, investing in CSR today is an investment in the future of your company. Doing the right thing will help you attract and keep the best people at your side, and support your company through the good times—and the bad.

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