Social purpose and value creation
The business returns of social impact
Doing well by doing good sounds nice, but can it deliver quantifiable business benefits? Research on social value creation says yes—in at least six key ways.
- Making the business case for social responsibility
- Six key drivers of social value creation
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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.
- 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.
- 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
- Identifying underserved social and environmental needs are strong drivers of innovation, enabling companies to explore new models and technologies that generate new market opportunities.
- 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
- 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
- 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
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.