Human Resources for Sustainability

The Business Case

One of the top, if not the top, factor driving CSR take-up is the need for businesses to attract and retain high quality staff to meet current and future demands, identified by 65% of respondents in a global study of privately held businesses conducted by Grant Thornton (Grant Thornton, 2008A, p. 4). A strong employer brand aligned with employee values and concerns is becoming recognized as one of the best ways of retaining talent with employees proud to work for a business that is highly regarded. Further, staff attrition is disruptive, putting pressure on the remaining employees and absorbing management time. Staff turnover can result in increased operating costs, loss of business to competitors and reduced customer service standards (Grant Thornton, 2008B, p. 12) A well-developed performance and talent management strategy with embedded CSR components can reduce the likelihood and impact of losing employees.

Generally, there is a growing desire among employees to derive a sense of greater purpose from their work; happier employees with increased job satisfaction can unleash innovation in a firm.  The following list provides an overview of the key business benefits and economic value from employee CSR engagement. (Drawn from “The Business Case for Sustainability”)

  • Increased retention and reduced recruitment and training costs
    A survey conducted for the Conference Board of Canada in 2000 found that 71% of employees want to work for companies that commit to social and community concerns. In a similar Corporate Citizenship study by Cone Inc. in the U.S., 77% of respondents indicated that “a company’s commitment to social issues is important when I decide where to work”.  A Scotiabank 2007 study of employed Canadians concluded that 70% would consider changing jobs if their employers did not operate in a socially responsible manner.  With the replacement costs for the average worker about $50,000 including lost output, recruitment, training and other elements, it pays for companies to manage their CSR as well as their financial performance. (Another study has put the recruitment, interviewing, hiring, training and reduced productivity costs at $3,500 to replace one $8.00/hour employee.1)  Further evidence of the importance of social and environmental performance management comes from a World Business Council for Sustainable Development (WBCSD) publication, in which it was reported that “three-fifths of the graduates and potential employees surveyed by Accenture in 2004 rated ethical management as an important factor in their job search.  Similarly over two-thirds of the students (68%) in a global survey by GlobeScan in 2003 disagreed that salary is more important than a company’s social and environmental reputation when deciding which company to work for.” (Pierce & Madden (n.d.), p. 5) And in the UK, 75% of professionals take social or ethical considerations into account when changing employment, while over half of graduates will not work for companies they believe to be unethical.  Also relevant here are the statistics provided in the introduction regarding the drop in staff turnover reported at Novo Nordisk and Sears (5 and 20% respectively) as a result of improvements in their CSR performance.
  • Better able to attract the best and the brightest, especially amongst graduates
    The Aspen Institute’s 2007 study of MBA students found them to be expressing more interest in finding work that offers the potential of making a contribution to society (26% of respondents in 2007 said this is an important factor in their job selection compared with 15% in 2002).  Further, in a 2006 study of 14 – 18 year-olds, 78% said money “was less important to them than personal fulfillment”.  They went on to work for “companies that promote equality, a green environment, and social responsibility.” (commissioned by ad agency Energy BBDO, as reported in “Saving the World at Work”, by Tim Sanders.)  Even more remarkable, a 2003 Stanford University study Corporate Social Responsibility Reputation Effects on MBA Job Choice found that MBA graduates would sacrifice an average of $13,700 in salary to work for a socially responsible company.  Some predict that the war for talent will not be won through money, but through these intangibles.
  • Cost savings and income produced through improved employee morale and productivity
    It has long been known that a more motivated, engaged and inspired workforce produces higher long-term productivity. A 2002 GlobeScan International survey showed that eight in ten people who worked for a large company felt greater motivation and loyalty towards their jobs and companies the more socially responsible their employers became. Another study, reported on in the WBCSD publication revealed that 70% of staff who were committed to the values of the company said that their productivity had increased in the past year while of those staff not committed to the company only 1% had productivity improvements. (Pierce & Madden (n.d.) p. 9)  Bob Willard, retired Canadian telecommunications executive and well known CSR author and thought leader, has predicted that companies can expect a 2% increase in employee productivity from improved company-wide teaming around common sustainability issues that transcend departmental boundaries, and a 2% increase in employee productivity from an improved work environment as a result of CSR. These percentages generate tangible economic value to any firm’s balance sheet. Further, it is well understood that boosted employee satisfaction and performance leads to increased customer satisfaction, generating a further win-win for CSR oriented companies. The converse is also true. Brand research reveals that in a study of customer behaviour, “8% of customers switching brands are lured away by competition; in contrast, 68% are turned away by an employee’s indifferent attitude.” (Melcrum, 2008, p. 3 citing American Marketing Association)  Research shows that every unsatisfied customer tells at least eight people about their experience.  (Melcrum, 2008, p. 3). Engaged employees are the company’s best defense against this virus.  Employees working for organizations aligned with their values are more likely to foster customer satisfaction and loyalty.

These business case benefits to the HR value proposition for firms with a strong CSR brand are well documented and are driving many firms to intuitively strive for higher CSR performance—to show that CSR is “the way we do things around here”. The following is a roadmap or pathway for HR practitioners who seek to contribute to the firm’s success and simultaneously, improvements to local and global social and environmental quality.


Footnote

Blake, R. 2006. WebProNews. Employee Retention: What Employee Turnover Really Costs Your Company. accessed Feb. 9, 2009.

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