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Inside magazine issue 12 | Part 03 - From a corporate perspective Moreover, times are changing and customers may actually be willing to pay more for companies with a positive social or environmental impact. Following a study carried out by Nielsen in 2014, more than 50 percent of online customers are willing to pay higher prices for a company with a positive social or environmental impact 4 , allowing companies to generate a price premium and higher margins as a result. This finding was confirmed by a study carried out by the Tuck School at Dartmouth, which found that a 1-unit improvement in social and environmental impact (proxies for this were fair employee treatment and local sourcing) was able to generate a price premium of between 12–16 percent compared to the original price 5 . Besides workforce efficiency, operational efficiency is also one of the elements that can be significantly improved through CSR measures. Examples of the benefits of communicating about a CSR strategy include increased customer identification with the brand, customer loyalty and brand perception, share of wallet and buy willingness 3 . A study carried out by a market research institute in Canada in 2014 showed that 84 percent of people interviewed stated that—if price and quality were similar—they would switch to a brand that is affiliated with a good cause. The second benefit of a CSR strategy with a real environmental or social impact is that it may generate promotion by customers themselves through word of mouth or the viral effect of campaigns: convinced cause supporters share the message, allowing companies to engage in less costly promotion and reach new customers. Price: Price premiums for social or environmental impact coupled with increased efficiency can drive margins. An effective CSR strategy may also be beneficial for companies’ margins. The Canadian study shows that the affiliation of a product with a cause is important for customers and can constitute a decisive buying factor if the price and quality are similar. The food and beverages industry is currently one of the leading industries when it comes to making customers pay for social and environmental impact, with companies such as Exki, KZ Noir and Starbucks being able to set significantly higher prices; however, other industries are following suit and capitalizing on their social impact (e.g. Fairtrade) to set higher prices and generate higher margins. People: In the marketing mix, people are the last of the Five Ps and an essential embodiment of the product. Staff should be able to identify with the brand, the product and the company in order to be able to deliver the best possible customer service, and support the four Ps outlined above. While the link between CSR and the “People” factor may not seem obvious at first, recent research has shown that employees are highly motivated when working for a company that is considered to have a positive social or environmental impact and are consequently likely to perform better. Furthermore, studies also show that there is a strong link between a CSR strategy perceived as being successful and the identification of employees with the company through perceived external prestige (PEP) 6 . A company can therefore 114
Inside magazine issue 12 | Part 03 - From a corporate perspective take advantage of a well-defined CSR strategy to create true brand ambassadors, who are proud of their company, and thus increase the potential for superior customer service. Case Study: EXKI— recruiting with sustainability 2. Driving efficiency gains While the contribution of CSR to the Five Ps allows companies to support revenue growth, CSR can also lead to significant efficiency gains. The main sources of such gains are linked to the efficiency of the workforce and existing operations. The motivational aspect and the influence of PEP on employee motivation discussed earlier have been shown to have a positive effect on employee turnover. In particular for larger companies, which tend to invest large amounts in recruitment and retention 7 , reducing employee turnover through effective CSR measures can lead to cost reduction in terms of recruitment and training of new staff, and improving workforce efficiency. Besides workforce efficiency, operational efficiency is also one of the elements that can be significantly improved through CSR measures. Although this often involves a large up-front capital investment to increase operational efficiency through measures such as reducing energy use, improving processes and changing packaging practices, subsequent cost savings can represent an advantage for companies. This effect will be compounded in the future as resource scarcity intensifies and resource costs increase. EXKI, a Belgian quick service restaurant chain founded in 2000, has put social and environmental impact at the center of its strategy. The four sustainability cornerstones of EXKI’s strategy are: 1. Health: EXKI communicates to consumers that it favors natural, additive-free, local and seasonal products. 2. Environment: EXKI communicates extensively on its sustainability measures, such as eco-friendly packaging, restaurants within reach of public transport and loyalty cards that reward sustainable behavior. 3. Work: EXKI specifies the measures it takes to encourage staff development and training. 4. Partnership: EXKI has created partnerships with other companies to optimize its environmental and social impact (e.g. Deloitte). The company actively uses its CSR efforts to promote the brand. For example, the company offers a so-called “Green Card”, which is a loyalty card that also rewards sustainable behavior of consumers, and charges premium prices for its organic produce. EXKI furthermore capitalizes on its positive social and environmental impact to recruit its staff. Open positions are systematically advertised with the slogan “Are you looking for a sustainable job?” CSR is an opportunity for companies: they just need to seize it In conclusion, CSR is no longer something boards can neglect, but has become a must. However, this challenge—like all challenges—represents an opportunity for those companies that embrace it and try to devise creative strategies to implement it. In the long term, the companies that consider their social and environmental impact in building their corporate strategy will have an advantage. They will be able to benefit from growing revenues and increased efficiency to create a sustainable future. 3. e.g. Wu and Wang (2014): Impact of CSR Perception on Brand Image, Brand Attitude and Buying Willingness: A Study of a Global Café 4. http://www.nielsen.com/us/en/press-room/2014/global-consumers-are-willing-to-put-theirmoney-where-their-heart-is.html 5. http://adage.com/article/cmo-strategy/corporate-social-responsibility-build-customerloyalty/227729/ 6. Kim, Lee, Lee, Kim (2010), Corporate Social Responsibility and Employee Company Identification 7. http://www.forbes.com/sites/insead/2013/08/14/when-it-comes-to-csr-sizematters/#5f0635dc1b6f 115
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Inside Triannually insights from De
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Inside magazine issue 12 | Contents
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Inside magazine issue 12 | Foreword
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Inside magazine issue 12 | Part 01
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Page 64 and 65: Inside magazine issue 12 | Part 02
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Page 146: Our expert authors, who are brimmin
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