Social purpose and value creation

Making the business case for social responsibility

Few people would disagree that companies should be socially responsible, but as part of our social enterprise and sustainable business consulting, Deloitte wanted to assess whether or not businesses are realizing a measurable return on their socially-beneficial investments—in causes such as environmental sustainability, ethical labor practices, empowerment of disadvantaged groups, and health and welfare of communities.

In an extensive review of the literature, we found a number of drivers of corporate value creation.

Six key drivers of social value creation

Consumers, talent, communities, investors, and governments are setting increasingly higher expectations for socially and environmentally beneficial practices from corporations. Company leaders increasingly recognize a shift from a focus on shareholder value to an emphasis on a broader stakeholder value, because in doing so companies are actually better at driving long-term shareholder value. Nevertheless, many leaders still struggle to make the business case for "doing good."

Our research provides evidence of six key drivers of social value creation, beyond rhetoric and sentiment, to support champions of corporate social strategy and help persuade skeptics that companies can do well by doing good.

Key findings

1. Mitigating regulatory risks and securing a social license to operate are long-standing motivators for companies to adopt a social strategy but are increasingly mere table stakes in today's competitive landscape.
2. The majority of consumers say they will pay more for products from socially responsible companies—and consumers are increasingly following through on their convictions. Brands with a demonstrated commitment to sustainability are seeing average sales growth outperform brands without demonstrated commitment by fourfold.¹
3. Identifying underserved social and environmental needs are strong drivers of innovation, enabling companies to explore new models and technologies that generate new market opportunities.
4. Companies with a strong social strategy tend to see higher employee engagement, and "high engagement" companies have been found to significantly outperform "low engagement" companies in year-over-year changes in net income and stock earnings per share.²
5. Operational efficiencies from more sustainable practices can save companies up to 45 percent in costs, with an ever-growing list of major companies seeing annual savings in the hundreds of millions.³
6. Capital markets tend to reward socially active firms, with companies added to the Domini 400 Social Index realizing a two percent gain in share price on average, while those removed from the list saw a 3 percent loss.⁴

Sources:
¹The Deloitte Consumer Review, "The Growing Power of Consumers," 2014.
²Cone Communications, "2015 Cone Communications / Ebiquity Global CSR Study," 2015.
³Nielson, "Sustainable Selections: How Socially Responsible Companies Are Turning a Profit," October 12, 2015.
⁴Towers Perrin, "Employee Engagement Underpins Business Transformation," 2009.
⁵Forbes, "If Sustainability Costs You More, You're Doing It Wrong," 2012.
⁶Devex Impact, "Is Corporate Social Responsibility Profitable for Companies?" February 20, 2013.