A recent Iowa State University study shows that a strong marketing department is important for firms seeking to leverage their socially responsible investments and returns.
Giving to charities and creating more sustainable products often depend on a corporation's bottom line. This can make a difficult situation for leaders as they debate between social responsibility and pleasing shareholders.
“A lot of firms question the benefit of corporate social responsibility (CSR) activities, because they are often viewed as more of a cost,” Sachin Modi, an associate professor at ISU’s College of Business, said. “Firms may not always see the benefit because they have to make an investment. What we want to show is that if a firm is good and has some complimentary capabilities, it can gain a lot from CSR activities.”
Now available in the Journal of Marketing, the study evaluates six separate kinds of CSR: products, environment, corporate governance, diversity, community and employees. The goal was to find whether using these efforts as marketing tools could raise the long-term value of the firm and its stock price.
The results demonstrate that combining CSR with marketing causes a 3.5 percent rise in stock returns. This eventually becomes a $242.34 million increase in stock value because of the average market capitalization. This increase depends on the kind of activity that is marketed; charitable giving and philanthropy was the only exception to the increases.
“As firms pick what initiatives to get involved with for the community and for charitable giving, they might want to focus on those which are more easily verifiable by consumers,” Modi said. “So they don’t necessarily have to advertise it, consumers just come to know this firm does a lot for a particular charity.”