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.