Opinion: Investors are willing to pay a premium for companies with a conscience

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Investors are willing to pay a premium for companies with a conscience GlobeBusiness

Ira Yeung is an assistant professor at UBC’s Sauder School of Business.

Corporate social responsibility, or CSR, has become a business buzzword, but it’s defined as actions that promote social good beyond the immediate interest of a company and its shareholders, and beyond what the law requires. So a company might start a scholarship fund, reduce their environmental footprint, have employees work with charities, or set up an in-house daycare.

We conducted a two-pronged study that looked at whether CSR does, in fact, influence investors’ decision-making – and whether companies, in turn, respond to that investor sentiment by engaging in more CSR. That’s not to say that CSR is necessarily part of a gold-rush-type cycle as nineties dot-com companies were and as blockchain companies could be; investors, consumers and workers are increasingly concerned about everything from climate change to diversity in the workplace, and there’s no sign that’s about to change.

As a result, business leaders need to invest in CSR for the right reasons. Perhaps it provides a return on investment; for example, the right environmental initiative could prevent a problem that would prove costlier in the future, or it could help employers attract the highly skilled employees that will elevate their companies. Similarly, if customers put a premium on social responsibility, it can push the company toward success.

 

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